TSMC Likely to Raise Chip Prices; Samsung Likely to Capitalize On It
Taiwan’s TSMC, the No. 1 global foundry company, is reportedly planning to charge up to 30 percent more for semiconductors manufactured in the United States than those made in Taiwan. It remains to be seen if the prices of Samsung Electronics’ chips will be affected by this move.
TSMC will reportedly charge up to 30 percent more for chips made in the United States than those made in Taiwan, according to foreign media outlets and industry sources on May 3.
TSMC has reportedly begun discussions with customers about pricing for its factories in the United States and Japan scheduled to start to roll out products in late 2024. This will result in a 20 to 30 percent price hike for TSMC’s 4-nm (N4) and 5-nm (N5) chips made in the United States, some analysts forecast.
TSMC has repeatedly pointed out that building semiconductor fabs outside Taiwan is much more expensive than building them in Taiwan. In the middle of April, TSMC founder Morris Chang warned during a panel discussion in Taipei, Taiwan, that the cost of producing semiconductor chips in the United States may double compared to the cost in Taiwan. Chang had previously predicted that TSMC’s chip plant in Arizona would cost over 50 percent more than its main production line in Taiwan, but on the day, Chang went further and claimed that it will actually double. TSMC is building a semiconductor plant in Arizona with a plan for a second plant to cost US$40 billion (52.5 trillion won) in total.
Industry insiders have consistently pointed out higher costs of building semiconductor fabs in the United States. According to the U.S. Semiconductor Industry Association (SIA), fabs in America are about 30 percent more expensive to build and operate over a 10-year period than those in Taiwan, South Korea, and Singapore. Even compared to fabs in China, they are 37 to 50 percent more expensive in the United States.
As a result, TSMC will pass on these additional semiconductor manufacturing costs to its U.S. customers, they say. It is a big challenge to know if TSMC’s customers, fabless companies, will tolerate such price hikes, but TSMC is highly likely to implement the pricing policy mainly for chips for electronic devices, which are less price sensitive.
Due to the high cost of building and operating fabs in the United States, TSMC will pass on these additional costs to its customers to maintain its gross margin target of 53 percent, sources say.
This complicates the math for Samsung Electronics’ foundry business, analysts say. Samsung will lean toward raising the prices of its chips because the cost of building a fab in the United States is ballooning, according to industry observers. On the other hand, Samsung Electronics, the No. 2 foundry player in the world, needs to increase its market share in competition with TSMC, so may not feel the need to raise prices to attract customers choosing between Samsung Electronics and TSMC.