TSMC to Implement Price Increases Amidst Supply Chain Challenges
Summary
- TSMC is contemplating a price increase of 5-10% on advanced technology OEM services due to rising costs influenced by US tariffs and exchange rate fluctuations.
- The foundry has seen a significant market share increase, now surpassing 70% in the wafer foundry market, with advanced processes like 3nm and 2nm expected to see price hikes.
- While costs rise for advanced processes, there may be reductions in prices for more mature technology nodes.
The ongoing US tariff war has significantly disrupted global supply chains, leading to increased operational costs for companies worldwide. Taiwan Semiconductor Manufacturing Company (TSMC), one of the world’s leading semiconductor foundries, is not exempt from these pressures. Reports indicate that TSMC is contemplating price increases for its original equipment manufacturer (OEM) services, particularly for advanced semiconductor technologies.
Price Increase on the Horizon
According to industry insights, TSMC is considering a price adjustment ranging from 5% to 10% for advanced technologies, influenced by a myriad of factors, including tariffs, fluctuating exchange rates, and escalating supply chain costs. This impending price increase is pertinent for advanced processes such as 5nm, 4nm, 3nm, and even the next-generation 2nm technology. Notably, while the prices for advanced processes are set to rise, there is a possibility of a decrease in the pricing of more mature technologies, aligning with trends from domestic chip foundries.
TSMC’s Market Standing
TSMC has recently broken the 70% barrier, now accounting for approximately 70.2% of the wafer foundry market—a milestone it has not achieved before. This dominance becomes even more pronounced in the realm of advanced processes below 7nm, where TSMC’s market share is estimated to be a staggering 90% to 95%. This monopolistic position would challenge customers in negotiating against price increases, as alternatives seem scarce.
Breakdown of Process Costs
The production costs associated with TSMC’s semiconductor technologies have escalated over the years. For instance, the cost for a 28nm wafer foundry was around $3,000, while the prices for more advanced nodes have risen significantly:
- 7nm process: $10,000
- 5nm process: $16,000
- 3nm process: $20,000
- 2nm process: expected to start at $30,000
If these prices adjust by 10%, substantial cost escalations will ripple through the market. Notably, mobile processors produced using TSMC’s advanced processes, including those from tech giants like Apple, Qualcomm, and MediaTek, will likely experience increased prices—predicted to be around 5%.
Impact on Industry Players
The implications of these adjustments are far-reaching, particularly in the mobile and graphics sectors. For instance, NVIDIA’s graphic processing units (GPUs) are also on the verge of cost increases due to TSMC’s revised pricing strategy. While the current Blackwell generation utilizes a customized 5nm 4N process, upgrades slated for next year to the 3nm process will be under scrutiny regarding their pricing.
Conclusion
As TSMC prepares to navigate these impending price increases, the broader tech landscape will likely experience consequent shifts in pricing strategies. While advanced technology nodes may see hikes, mature processes may provide a temporary relief for certain sectors. As the supply chain continues to grapple with tariffs and fluctuating costs, manufacturers and consumers alike will need to brace for the evolving economic landscape shaped by these developments.
In this context, TSMC’s strategic decisions underscore the intricate interplay of global market dynamics, manufacturing costs, and competitive positioning in the high-stakes semiconductor arena.
