Title: TSMC to hike prices for semicon chips produced overseas

Taiwan Semiconductor Manufacturing Company, or TSMC, is planning to implement a unique pricing strategy for its customers. The company intends to increase prices for customers who request chips produced outside of Taiwan.

This decision comes as TSMC has had to expand its production facilities outside Taiwan to increase its global capacity, largely due to escalating tensions with China.

Rising electricity costs and the growing complexity of developing advanced chip technologies have had a significant impact on TSMC’s profitability.

During the company’s first-quarter earnings call, CEO CC Wei informed investors that customers opting for chips manufactured in specific regions would need to bear the additional costs incurred.

He acknowledged that in today’s globalized and fragmented environment, higher expenses are inevitable for TSMC, its customers, and competitors alike. TSMC is currently in discussions with customers regarding potential price increases.

This move by TSMC to raise prices aligns with global efforts to diversify chip supplies away from Taiwan, where more than 90 percent of the most advanced semiconductors are currently produced.

This diversification is aimed at mitigating geopolitical risks, particularly in light of China’s territorial claims over Taiwan.

Recently, TSMC announced plans to increase its investment in the US to $65 billion, up from $40 billion, in exchange for subsidies totaling $6.6 billion.

This expansion includes the production of cutting-edge 2-nanometer chips by 2028 and the establishment of a third fabrication plant by the end of the decade.

While TSMC operates plants in various countries, such as Japan, and has upcoming facilities in the US and Germany, the cost of producing semiconductors outside of Taiwan is notably higher. The company allocates production capacity based on efficiency considerations.

TSMC anticipates a decrease in profitability this year due to factors such as escalating electricity costs in Taiwan, the impact of an earthquake in April, and slower efficiency improvements in 3-nanometer chip manufacturing, the most advanced technology currently in mass production.

Despite these challenges, TSMC reported a stronger-than-expected net profit for the first quarter and projects robust revenue growth in the second quarter, driven by demand for artificial intelligence chips.

The company forecasts that AI processors will contribute to over 20 percent of its revenue by 2028.

However, TSMC has maintained its capital expenditure budget for this year at $28 billion to $32 billion, indicating a stable expenditure compared to the previous year. The company also anticipates a slight decrease in gross margin for the second quarter, primarily due to rising electricity costs in Taiwan and the transition to 3-nanometer production.

Looking forward, TSMC remains optimistic about its long-term prospects, with plans to achieve a gross margin exceeding 53 percent in the future, particularly with the introduction of 2-nanometer chip production scheduled for late 2025.

Leave a Comment

Your email address will not be published. Required fields are marked *