NVIDIA's disclosure of the production challenge with the Blackwell GPU, particularly the fact that no functional changes were necessary, suggests that there are no fundamental design issues with the Blackwell architecture and highlights its robustness.
💡 NVIDIA $NVDA Blackwell GPU: production challenges and future outlook
On August 29, 2024, NVIDIA $NVDA made an important announcement regarding the challenges faced in the production of the Blackwell series, the next-generation datacenter GPU, and the measures taken to address these challenges. This announcement has the potential to significantly impact the company's short-term performance and long-term technological strategy.
1️⃣ Current Analysis: Challenges and Responses in Blackwell Production
According to information released by NVIDIA, there has been an issue of low yield in the production of Blackwell-based GPUs, especially the B200 processor. In order to address this issue, the company needed to redesign some layers of the B200 processor, including the top metal layer of the GPU silicon and the bump.
The background to this challenge is the adoption of TSMC's latest packaging technology, CoWoS-L (Chip-on-Wafer-on-Substrate with Local Silicon Interconnect). CoWoS-L is an innovative technology that connects chiplets at a very high speed of about 10TB/s, and its implementation requires a high level of precision. It is speculated by people in the semiconductor industry that a mismatch in coefficient of thermal expansion (CTE) between the GPU chiplet, LSI bridge, RDL interposer, and motherboard substrate may have caused warpage and system failures.
NVIDIA has already announced that it has completed the design changes to address these issues. Importantly, the company emphasizes that functional changes to the Blackwell silicon were not necessary, and all the changes were made to improve yield and ensure stable supply.
2️⃣ Schedule and Financial Impact Going Forward
NVIDIA has outlined its plan to start production of Blackwell in the fourth quarter of 2024 (October-December) and gradually expand it throughout the 2026 fiscal year. The company expects to generate "billions of dollars in Blackwell revenue" in the fourth quarter of 2024 alone, implying at least $2 billion or more in sales, as confirmed during the Q&A session.
On the other hand, it has become apparent that this production challenge has had a short-term impact on NVIDIA's gross margin. The company explains that it had to procure and produce "new low-yield materials" for Blackwell to meet customer demand, which affected the gross margin. However, since there is an expectation of yield improvement after the design changes, the long-term impact is likely to be limited.
📍 Future Outlook
NVIDIA's disclosure of the production challenge with the Blackwell GPU, particularly the fact that no functional changes were necessary, suggests that there are no fundamental design issues with the Blackwell architecture and highlights its robustness.
The following points will be important focus areas in the future:
1. Actual shipment volume and revenue for the fourth quarter of 2024:
Will NVIDIA achieve the forecasted "tens of billions of dollars" revenue from Blackwell standalone?
2. Blackwell shipment plans from fiscal year 2025 onwards:
Is there any change in the pace of production expansion and customer demand trends?
3. Progress in improving yield:
Will yield be improved by resolving yield issues, and what impact will it have on long-term gross margin?
4. Stability of new packaging technology:
What impact will the adoption of CoWoS-L have on the semiconductor industry?
5. Continued investment in AI data centers:
Will the demand for high-performance GPUs for AI data centers continue in the future?
Blackwell series GPUs have the potential to shape NVIDIA's next few years and the future. Overcoming initial production challenges and achieving planned shipments, as well as meeting market expectations for performance, will greatly influence the company's future growth and position in the market.
Investors need to evaluate not only short-term production challenges, but also NVIDIA's long-term technology strategy and market trends as a whole. The success of Blackwell can serve as an indicator of the development of the AI and high-performance computing market as a whole, rather than just the success or failure of a product line.
On August 29, 2024, NVIDIA $NVDA made an important announcement regarding the challenges faced in the production of the Blackwell series, the next-generation datacenter GPU, and the measures taken to address these challenges. This announcement has the potential to significantly impact the company's short-term performance and long-term technological strategy.
1️⃣ Current Analysis: Challenges and Responses in Blackwell Production
According to information released by NVIDIA, there has been an issue of low yield in the production of Blackwell-based GPUs, especially the B200 processor. In order to address this issue, the company needed to redesign some layers of the B200 processor, including the top metal layer of the GPU silicon and the bump.
The background to this challenge is the adoption of TSMC's latest packaging technology, CoWoS-L (Chip-on-Wafer-on-Substrate with Local Silicon Interconnect). CoWoS-L is an innovative technology that connects chiplets at a very high speed of about 10TB/s, and its implementation requires a high level of precision. It is speculated by people in the semiconductor industry that a mismatch in coefficient of thermal expansion (CTE) between the GPU chiplet, LSI bridge, RDL interposer, and motherboard substrate may have caused warpage and system failures.
NVIDIA has already announced that it has completed the design changes to address these issues. Importantly, the company emphasizes that functional changes to the Blackwell silicon were not necessary, and all the changes were made to improve yield and ensure stable supply.
2️⃣ Schedule and Financial Impact Going Forward
NVIDIA has outlined its plan to start production of Blackwell in the fourth quarter of 2024 (October-December) and gradually expand it throughout the 2026 fiscal year. The company expects to generate "billions of dollars in Blackwell revenue" in the fourth quarter of 2024 alone, implying at least $2 billion or more in sales, as confirmed during the Q&A session.
On the other hand, it has become apparent that this production challenge has had a short-term impact on NVIDIA's gross margin. The company explains that it had to procure and produce "new low-yield materials" for Blackwell to meet customer demand, which affected the gross margin. However, since there is an expectation of yield improvement after the design changes, the long-term impact is likely to be limited.
📍 Future Outlook
NVIDIA's disclosure of the production challenge with the Blackwell GPU, particularly the fact that no functional changes were necessary, suggests that there are no fundamental design issues with the Blackwell architecture and highlights its robustness.
The following points will be important focus areas in the future:
1. Actual shipment volume and revenue for the fourth quarter of 2024:
Will NVIDIA achieve the forecasted "tens of billions of dollars" revenue from Blackwell standalone?
2. Blackwell shipment plans from fiscal year 2025 onwards:
Is there any change in the pace of production expansion and customer demand trends?
3. Progress in improving yield:
Will yield be improved by resolving yield issues, and what impact will it have on long-term gross margin?
4. Stability of new packaging technology:
What impact will the adoption of CoWoS-L have on the semiconductor industry?
5. Continued investment in AI data centers:
Will the demand for high-performance GPUs for AI data centers continue in the future?
Blackwell series GPUs have the potential to shape NVIDIA's next few years and the future. Overcoming initial production challenges and achieving planned shipments, as well as meeting market expectations for performance, will greatly influence the company's future growth and position in the market.
Investors need to evaluate not only short-term production challenges, but also NVIDIA's long-term technology strategy and market trends as a whole. The success of Blackwell can serve as an indicator of the development of the AI and high-performance computing market as a whole, rather than just the success or failure of a product line.
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Kimihiko OP : It is natural to be concerned about the decline in growth rate because the denominator is expanding rapidly, but if TSMC's capacity increases, it will be positive
.