Nvidia may face manufacturing challenges with next-generation semiconductors, as enlarging chip sizes poses technical difficulties.

10/13 (Sun) 0:05

US Nvidia faced manufacturing challenges with the next-generation GPU (image processing semiconductor) 'Blackwell'. This was reported by the Wall Street Journal. There were concerns about production delays and potential cost increases. Here's a brief explanation of the details.

Nvidia's 'Blackwell B200', aiming to start mass production from November 2024 to January 2025, will be approximately twice the size of the current AI-focused GPU 'Hopper H100', at 40mm square. It will integrate 208 billion transistors. However, the company had already reached the size limit for chip manufacturing with the current Hopper. Therefore, the company is attempting a new method that has not been done before, combining two maximum-sized chips into one chip.
However, there is a need to overcome issues such as the complexity of the technology required to bond the chips. Each chip must be manufactured almost perfectly, as any defect could lead to catastrophic consequences. The more components there are, the higher the risk. Furthermore, the heat generated by these components can deform different materials within the package at different rates, leading to the risk of distortion.
"WSJ points out that although it is a series of challenging issues involving extremely small circuits, it has the potential to have a significant impact on revenue. With serious defects, one chip worth $0.04 million (5.85 million yen) could become unusable, leading to a decrease in yield."

There have been reports of delays in Blackwell's production system. However, the company revealed during the recent earnings call that it had started sample shipments in the May to July 2024 period. CFO Collette Crest stated, "We plan to start mass production in the fourth quarter of the 25th fiscal year (November 2024 to January 2025), with expected revenue contributions of tens of billions of dollars in the same quarter."

Furthermore, CEO Jensen Huang explained, "We modified the design to improve Blackwell's yield, without the need for functional changes to the chip, aiming to dispel concerns."

On the other hand, analysts from Swiss financial giant UBS noted, "The main challenge that NVIDIA faces with Blackwell lies in the complexity of Taiwan Semiconductor Manufacturing Company (TSMC)'s new chip bonding technology, which produces most of the company's products."

Due to the need for a new approach brought about by the increase in size, analysts mention new challenges such as the complexity of manufacturing technology and deformation affecting reliability and performance. On the other hand, they also state that "over time, the yield rate will increase, allowing chip production to proceed as planned by 2025."
In the 2nd quarter of Nvidia's fiscal year 2025 (May to July 2024), the revenue increased by about 2.2 times compared to the same period last year, and net profit increased by approximately 2.7 times, both reaching record highs.
However, the gross profit margin for the same quarter dropped to 75.1%, down from 78.4% in the previous quarter. It is believed that the impact of Blackwell's material inventory provision of $908 million (about 130 billion yen) was a contributing factor. Due to these factors, the company's stock fell by 6.4% on the day following the earnings announcement.

Supplementary comment from the author:
In the 2nd quarter of Nvidia's fiscal year 2025 (May to July 2024), the revenue was $30.4 billion (about 4.39 trillion yen) and net profit was $16.599 billion (about 2.43 trillion yen). As mentioned in this article, revenue increased by about 2.2 times compared to the same period last year, and net profit increased by approximately 2.7 times, both reaching record highs. Despite the positive earnings report, the company's stock declined. The reasons cited include: 1) lack of growth similar to the past year, 2) disappointment from some investors regarding revenue forecasts. For instance, regarding point 1, the company's net profit had been growing at rates of 9 times, 14 times, 3.7 times, and 7.3 times over the past 4 quarters, but this time it was 2.7 times. Nonetheless, CEO Fan expressed confidence by stating, "The direction in which AI development is moving is very diverse, and I am actually witnessing the momentum accelerating."