Taiwan's TSMC to Increase US Foundry Prices by 20-30%

As the world's largest semiconductor foundry, Taiwan Semiconductor Manufacturing Company (TSMC) plays a vital role in the global chip market. According to recent reports by DigiTimes, TSMC is preparing to increase its foundry prices for chips produced at its US plant due to higher manufacturing costs compared to its Taiwan operations. This article explores the implications of this move for TSMC's customers and the wider semiconductor industry.

Price Hike: Causes and Impact

It has been reported that TSMC's foundry prices at its US plant could be 30% higher than those at its Taiwan facilities. The primary reason for this increase is the higher manufacturing costs in the US compared to Taiwan. Despite the potential backlash from US-based chip design companies, TSMC is likely to pass on these additional costs to its customers without jeopardizing its competitive position.

Previously, Zhang Zhongmou, the founder of TSMC, said that the manufacturing cost of TSMC's US fab will be 50% higher than that of Taiwan, China. Of course, if other favorable factors such as cash subsidies and tax breaks provided by the US government are taken into account, the final manufacturing cost may not be that much higher, but the 20%-30% higher expected by the industry is still very possible.

The price increase is expected to affect chips produced using TSMC's N4 and N5 process technologies, with US prices 20%-30% higher than those in Taiwan. For older process technologies produced at TSMC's Japanese Kumamoto plant, prices are expected to be 10%-15% higher than those in Taiwan.

Supply Chain Diversification and Localization

The ongoing geopolitical tensions and the push for domestic semiconductor manufacturing have prompted chip design companies to diversify and localize their chip manufacturing supply sources. TSMC's move to establish factories in the US and Japan is not only in response to government demands but also to meet the requirements of local customers.

Major TSMC customers like Apple, AMD, and Qualcomm are expected to continue working with the foundry despite the price hike. These companies value TSMC's technological leadership and manufacturing yields, which remain superior to those of competitors like Samsung and Intel.

However, some TSMC customers are reportedly considering shifting part of their orders to other foundries like Samsung and Intel to control costs more flexibly. For example, MediaTek, a significant TSMC client, announced a strategic partnership with Intel in July last year to use Intel's 16nm process technology for producing a range of smart edge device chips.

Long-term Implications for the Semiconductor Industry

While the price increase may have a short-term negative impact on some customers, it could ultimately contribute to the diversification and growth of the global semiconductor industry. By involving more countries and regions in chip production, the industry can reduce supply chain risks, enhance competition, and help alleviate the global semiconductor supply crunch.

TSMC's dominant market position and importance in the global semiconductor industry provide it with substantial bargaining power. Over the next few years, TSMC is expected to continue expanding its market share worldwide and maintain close collaboration with numerous customers to promote ongoing innovation and development in semiconductor technology.

Challenges and Opportunities for TSMC and Its Customers

While TSMC's decision to raise prices for chips produced at its US plant presents challenges for both the foundry and its customers, it also brings opportunities for growth and collaboration. As companies seek to adapt to these changes, they will need to consider both the short-term impact and the long-term benefits of their decisions.

Cost Control Strategies

With the increase in foundry prices, TSMC's customers may need to reevaluate their cost control strategies. Some may choose to shift part of their orders to alternative foundries, while others may decide to maintain their relationship with TSMC due to its technological superiority and manufacturing yields. In either case, companies must weigh the potential risks and benefits of their decisions carefully, considering factors such as lead times, quality, and supply chain reliability.

Technological Innovation and Collaboration

Despite the price hike, TSMC's strong track record in technological innovation and collaboration with its customers is likely to continue attracting companies to work with the foundry. Apple, for example, remains committed to TSMC and is expected to maintain a 20%-30% discount due to their close collaboration in driving process migration and technology breakthroughs.

Global Semiconductor Industry Growth

The global semiconductor industry is expected to grow as more countries and regions invest in chip production. As companies like TSMC establish factories in new locations, they contribute to the diversification of the industry, reducing supply chain risks and fostering competition. This growth is likely to benefit not only TSMC and its customers but also the global economy as a whole, as demand for advanced semiconductor technology continues to rise.

Conclusion

TSMC's decision to increase foundry prices for chips produced in the US is undoubtedly a significant development for the global semiconductor industry. As the world's largest semiconductor foundry, TSMC's actions have a profound impact on its customers and competitors alike. While the price hike presents challenges for both TSMC and its customers, it also offers opportunities for growth, collaboration, and the diversification of the global semiconductor industry. Companies must adapt to these changes and make strategic decisions that ensure their long-term success in an increasingly competitive and dynamic market.