TSMC to Increase Prices on Advanced Chip Manufacturing Processes: An In-Depth Analysis
Summary:
- TSMC will begin mass production of its 2nm process by the end of 2023.
- Price increases for processes below 5nm will last for four consecutive years starting January 2026, averaging 3-5%.
- High demand for AI and HPC chips drives the need for advanced manufacturing technologies.
Taiwan Semiconductor Manufacturing Company (TSMC) is on the verge of a significant milestone as it prepares to mass-produce its cutting-edge 2nm chip manufacturing process by the end of this year. However, this landmark achievement comes with pressing concerns regarding associated price increases that could reshape the semiconductor landscape.
Price Increases Loom on the Horizon
Starting January 2026, TSMC has notified its clients of impending price hikes for its advanced manufacturing processes, particularly those below 5nm. This includes the 5nm, 4nm, 3nm, and, now, the upcoming 2nm technology. The anticipated average increase is projected to be between 3% and 5% annually over a span of four years. For the 3nm process specifically, while the annual increase remains in single digits, it is expected to accumulate beyond 10% over the four-year period.
The company’s pricing model will utilize a "compound interest" approach, meaning each year’s price increase will be based on the previous year’s prices, compounding the overall impact.
Factors Driving Price Increases
The key driver behind these price hikes is the escalating demand for advanced chip technologies. The surge in the requirement for artificial intelligence (AI) and high-performance computing (HPC) chips is placing immense pressure on production capacities. The increasing popularity of AI-equipped personal computers, self-driving vehicles, and industrial automation technologies is further intensifying the drive for cutting-edge semiconductor processes.
Major industry players such as Qualcomm, MediaTek, Apple, NVIDIA, and AMD are particularly invested in TSMC’s 2nm technology. Innovations like Qualcomm’s sixth-generation Snapdragon 8 Extreme Edition, MediaTek’s Dimensity 9600, and Apple’s A18 series are poised to leverage TSMC’s upcoming fabrication prowess.
Impending Shortages in Manufacturing Capacity
As TSMC reallocates resources to focus on processes of 5nm and below, there are significant implications for its older technologies. Notably, the production capabilities for 7nm and 6nm processes have already seen a dramatic decline, and analysts are projecting a severe shortage in these areas by next year.
In TSMC’s recent financial disclosures, advanced processes constituted 74% of total revenue in the third quarter of 2025, with 37% attributed to 5nm and 23% to 3nm. As TSMC gears up for the mass production of its 2nm process, industry experts foresee advanced technology revenue surpassing 75% of total revenues.
Conclusion
The impending price increases from TSMC are symptomatic of a shifting semiconductor ecosystem influenced by rising demands and limited production capabilities. As firms across technology sectors scramble for access to advanced processes, the financial implications for both manufacturers and consumers alike could be significant.
Investors and stakeholders must remain attuned to these developments as the semiconductor market navigates these complex dynamics. As TSMC embarks on this new chapter with its 2nm technology, the interplay of demand, capacity, and pricing will undoubtedly shape the future landscape of the semiconductor industry.
