TSMC, after months of speculations and rumors, seems to have really raised its prices this time. As usual, TSMC declines to comment, but sources from several IC design companies have revealed that TSMC intends to raise its production prices by 15-20%, starting from Q1 2022.
Nevertheless, insiders have indicated that the price hike will be introduced at different time points specific to each TSMC customer, generally starting as early as October. There are also conflicting reports regarding the price hike for different process nodes. Some have indicated that nodes below 12nm will see prices going up by 10%, while the rest will be raised by as much as 20%. Another source, however, suggests that TSMC has raised the prices by 20% for all nodes above 16nm, especially the 28nm process at the center of the recent chip shortage crisis.
Fortunately, it seems that the chips currently under production are not included in the price hike.
TSMC’s price hike comes belatedly in the foundry industry. Of late, United Microelectronics Corp. (UMC), another Taiwanese foundry, has raised its prices multiple times, to the point that several TSMC process nodes have become cheaper than those of UMC – a rarity in the industry. Usually, TSMC production prices are 15-30% higher than those of UMC. SMIC, China’s main foundry, has also raised its prices recently.
According to analysts, apart from the disruptions caused by the ongoing shipping shortage crisis, which in turn drive up the prices for the raw materials needed in IC manufacturing, the price hikes are also an attempt to address TSMC’s earlier strategic missteps. Despite the 45-50% global market share of TSMC’s 200mm capacity as well as the overwhelming 70% global market share of its mature nodes on 300mm wafers, TSMC’s capital expenditure had been prioritizing its advanced processes, and even claimed that its mature nodes were facing overcapacity, eventually leading to TSMC losing its market share in mature manufacturing processes. Compared to the first half of 2020, in 2021 TSMC sees its market share in mature nodes dropping by 3%, while the rest of the foundry industry generally sees a 20-30% growth.
As TSMC seeks to expand its presence in the US, Japan and Europe, its rising capital expenditure has become a further drag on its gross margin, now dangerously close to drop below 50%. The price hike, therefore, is an inevitable course to take.