Another Price Increase? TSMC’s Customers Have Agreed to Raise the Price of 3nm Process

09 July 2024 39


Recently, the news of TSMC’s price increase has caused a huge stir in the semiconductor field. As the world’s top chip foundry giant, every step of TSMC’s actions has a profound impact on the entire industry. According to the latest news from the supply chain, on July 7, most of TSMC’s important customers have agreed to increase the cost of foundry services in exchange for more reliable supply. This decision not only consolidates TSMC’s voice in the industry, but also indicates that the semiconductor industry may enter a new stage of development, and this series of changes may eventually be shared by consumers through adjustments in product prices.


Analysts pointed out that this price increase is not a rash move, but a decision made by TSMC after careful consideration based on the current market environment. With the acceleration of the global digitalization process, the demand for chips continues to grow. As the world’s leading chip foundry, TSMC’s production capacity has naturally become the focus of competition among major technology giants. Against the backdrop of major customers competing to book production capacity, TSMC’s 3nm process capacity has been in short supply. In order to ensure a stable supply of chips, many customers have to accept higher foundry prices.


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Qualcomm’s fourth-generation Snapdragon 8 processor and MediaTek’s Dimensity 9400 are both reportedly going to be built on TSMC’s 3nm process, and both are already in production. In light of Apple’s upcoming A18 series chips this year, and Google’s possible release of its Tensor G5 chip, the SoCs (system-on-chips) that power many of the flagship smartphones on the market will soon be joining TSMC’s 3-nanometer family of products, a phenomenon that is directly contributing to the surge in orders for TSMC’s advanced processes.


It is reported that TSMC’s 3nm process capacity reservations have been scheduled until 2026. Given that there are multiple signs that capacity may be tight in 2025, these customers are likely to face insufficient capacity. Therefore, the industry generally expects that customers will have to accept TSMC’s price increases next. Moreover, from the overall trend, the price increase may exceed the previously expected 2%, and is expected to reach 5% or more. Currently, AI chip giants are willing to pay advance payments to seize cutting-edge process capacity in 2025, and are also willing to accept price increases for advanced packaging CoWoS, which could reach 20%. Therefore, more optimistic wafer pricing and strong SoIC 3D IC demand are expected to boost TSMC’s revenue.


Industry insiders pointed out that as TSMC increases its quotes for advanced process orders, its gross profit margin is expected to reach 55.1% in 2025 and further rise to 60% in 2026. This abundant funding situation allows TSMC to increase its R&D investment in the next generation of 2nm process technology without worries. It is predicted that TSMC’s capital expenditure will reach $35 billion and $37 billion in the next two years respectively.


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TSMC’s price increase decision will undoubtedly have a profound impact on the entire semiconductor industry. On the other hand, TSMC’s move may also become a “catalyst” in the semiconductor industry, prompting other manufacturers to re-examine their pricing strategies and market positioning. Faced with TSMC’s price increase, some competitors may choose to follow the price increase to maintain profit levels; while others may reduce costs through technological innovation, optimizing production processes or seeking alternative suppliers to maintain competitiveness in the market. This chain reaction in the industry may trigger a new round of industry reshuffles and reshape the competitive landscape of the semiconductor market.


In addition, TSMC’s price increase may also accelerate the semiconductor industry’s migration to higher technology nodes. In order to cope with the pressure of rising costs, downstream companies may more actively seek chips with more advanced process technology to improve product performance and reduce unit costs. This will further promote technological progress and industrial upgrading in the semiconductor industry, and bring new development opportunities and challenges to the entire industry.


Although TSMC’s price increase strategy has attracted widespread attention in the market, it has not had a negative impact on its cooperative relationship with customers. On the contrary, many customers have expressed their understanding and acceptance of this change. They believe that the stable and reliable chip supply provided by TSMC is the core cornerstone to support the sustainable development of their business. To ensure the stability of this cornerstone, customers are willing to bear slightly higher foundry fees and regard it as a necessary cost investment to ensure the stability of the supply chain. More importantly, TSMC’s price increase behavior also provides customers with a reasonable basis for raising prices. Affected by this, chip manufacturers generally raised product prices by about 25% to 30%, and mobile phone manufacturers had to accept this price increase from the upstream supply chain. Subsequently, mobile phone manufacturers also passed on this cost increase to mobile phone prices, and ultimately consumers borne this part of the cost.


How TSMC’s decision will affect the future market landscape is worthy of our continued attention.




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