Tesla, as reported in Financial Times, has agreed to pay contract chipmakers in advance to secure its critical supply. It is a move considered unusual, given chip makers’ preference for a flexibility in capacity allocation. Moreover, according to Seraph Consulting, Tesla’s supply chain consultancy, Tesla is also contemplating to purchase a foundry.
Now, industry insiders in Taiwan have claimed that Macronix International Co., a Taiwanese chipmaker, might sell one such foundry to Tesla. Both Tesla and Macronix have declined to comment.
Curious enough, the Taiwanese electronics contract manufacturer Foxconn also expressed the interest to acquire the same foundry. Foxconn has lately made EV and semiconductor their priorities, as a part of the company’s effort to improve its chronically low gross margin.
If Tesla indeed acquired a foothold in Taiwan, it would be right at Foxconn’s doorstep.
Tesla not spared by chip shortage
Elon Musk, Tesla founder and CEO, recently admitted that the company had “insane difficulties” with its supply chain. According to Musk, Tesla faced “some of the most difficult supply-chain challenges” since its foundation. Tesla even briefly halted its Model 3 production in California as a result of the supply chain issues.
Tesla started designing its own self-driving chips in 2016, eventually integrating them into the Hardware 3.0 autopilot computers. The chips were manufactured by the South Korean company Samsung at 14-nm node. The next-generation chips for HW 4.0, as it seems, would still be manufactured by Samsung at 5nm, despite previous claims that it would be made by TSMC at 7nm.
Macronix put its foundry on sale
Macronix is an IDM specialized in Non-Volatile Memory (NVM) chips, offering ROM, NAND Flash and NOR Flash products. As the largest NOR Flash provider in Taiwan, Macronix has been supplying NOR Flash chips to Tesla, and it own three foundries: a 300-mm fab, a 200-mm fab and a 150-mm fab. While the first two fabs are designated for Macronix’s NVM products, the 150-mm one was previously allocated for its contract manufacturing business, specialized in niche analog and logic products.
In 2020, contract manufacturing only accounted for 9% of Macronix’s revenues. As it became difficult to upgrade the 150-mm fab as well as the company’s decision to focus on the NVM business, last year Macronix decided to sell the fab. The fab has officially halted production in this April. Before it was shut down, its capacity was 20,000 wafers per month.
After it was put on sale, it had attracted many buyers. The fab’s capacity has become critical in the time of global chip shortage and the strained manufacturing capacities worldwide. Among the buyers were UMC and Foxconn. Foxconn’s venture into the EV sector prompted it to focus on automobile chips. Young Liu, Foxconn CEO, once said that the company sought niche chip products at 150-mm capacity. And Macronix offers just that.
By the end of this quarter, according to Macronix, the purchase deal would be made public. If the buyer really turned out to be Tesla, it would be in line with Tesla’s preference for vertical integration, following its announcement to manufacture its own batteries last year.