The fact that the recession has reduced demand for all capitalistic consumables is not news. But the specific fact of the recent drop in silicon wafer prices is new. And it immediately raises expectations of cheaper actual chips.

The news comes from Taiwanese media UDN (open in new tab) (via HardwareLUXX (open in new tab)), specifically concerning blank or raw silicon wafers for etching chips using advanced lithography processes It is.

According to press reports, prices for 6- and 8-inch wafers have fallen for the first time in three years, while prices for 12-inch wafers have stabilized but are expected to fall soon. The most important foundries, TSMC and Intel, use larger 12-inch wafers for their most advanced processes.

Higher wafer prices are part of the reason chip prices have risen so dramatically over the past few years. According to industry observers, the price of TSMC's finished wafers with fully etched chips has risen from $10,000 per wafer for 7nm wafers in 2018 to $20,000 per wafer for the latest 3nm technology In 2016, a TSMC 10nm wafer was only $6,000

Of course, blank wafer prices are far from the only factor determining final chip prices. Modern multilayer production nodes are much more complex and take much longer to process than earlier nodes. And yield is always absolutely critical in determining individual component prices.

Thus, cheaper blank wafers do not immediately translate into cheaper actual chips, despite the fact that demand has been significantly reduced by all manner of factors, including the widespread recession, rising interest rates, inflation, and the demise of cryptocurrency mining.

Furthermore, it is unlikely that companies like TSMC will simply pass on lower blank wafer costs to customers like AMD and Nvidia. In that case, even if these companies wanted to give back to the long-suffering gamers, they would not be able to. And it is highly doubtful that they will.

Indeed, as we reported recently (opens in new tab), AMD and other chipmakers regularly adjust their chip production to prevent an oversupply of products and the resulting price drops. The same applies to silicon wafers, with UDN reporting that many chip foundries are delaying wafer deliveries and lowering production volumes.

In the very long run, sustained lower demand will lead to lower prices. And GPU prices are down from their pandemic and crypto-fueled peaks. But the wafer price mechanism is just one more insight into why chip prices, and by extension the cost of things like graphics cards, are likely to fall slowly, rather than suddenly plunge.

We must wait patiently.