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Taiwan Semiconductor Manufacturing Co has warned clients for the second time in less than a year that it plans to raise prices, citing looming inflation concerns, rising costs and its own massive expansion plans to help alleviate a global supply crunch, people briefed on the matter told Nikkei Asia.
TSMC, the world’s biggest contract chipmaker, is planning to raise prices by “single-digit percentages” across both mature and advanced chip production technologies, according to six people with knowledge of the matter. The planned price increase would take effect by the beginning of 2023, they said.
Two people said the price increases would be around 5 to 8 per cent for different process technologies, from cutting-edge to legacy nodes, making products from advanced processors, connectivity chips and sensors to microcontrollers and power management integrated circuits.
“The early notice is to give customers some buffer to prepare for the price adjustments, while TSMC’s move to raise prices is to address increasing costs and capital needs for historic expansions,” one of the people with knowledge told Nikkei Asia.
Another executive familiar with the matter said given the slowing demand for products such as smartphones and PCs, it might be difficult for clients to fully accept TSMC’s planned price rise “For the advanced chips it might work, but for matured nodes it could be quite challenging for customers to accept,” the person said.
Rising production costs are putting pressure on chipmakers at a time when demand for smartphones and personal computers has slowed on market uncertainties sparked by inflation, the Ukraine war, and Covid-related lockdowns in China. The price increase also reflects the hefty costs of TSMC’s own expansion push. It is spending $100bn through to 2023 to increase capacity, with $40bn to $44bn earmarked for this year alone.
This article is from Nikkei Asia, a global publication with a uniquely Asian perspective on politics, the economy, business and international affairs. Our own correspondents and outside commentators from around the world share their views on Asia, while our Asia300 section provides in-depth coverage of 300 of the biggest and fastest-growing listed companies from 11 economies outside Japan.
TSMC’s notification comes less than a year after its biggest price increase in a decade. Last August, it told its clients it would increase prices by up to 20 per cent amid the unprecedented global chip shortage and its historic expansion plans. Smaller rivals such as United Microelectronics and Semiconductor Manufacturing International Co raised prices several times last year and in some cases actually charge more than TSMC. Still, such a rare move by TSMC rattled the chip industry.
In another surprise, TSMC said last year it would halt its practise of lowering prices each quarter for its chip design clients after their products go into mass production and the process is running smoothly.
TSMC chair Mark Liu said in March all semiconductor manufacturers had been directly affected by the rising prices of components and materials, which were driving up production costs.
TSMC’s move comes as the chipmaking equipment industry grapples with severe shortages of everything from components to parts to materials. These shortages are prolonging the delivery times of machines to up to 18 months for customers such as TSMC, potentially threatening the chip industry’s expansion plans.
ASML, Europe’s biggest chip production tool maker, told investors that it faces inflation concerns, costs increases in labour, materials and energy, as well as additional fees for securing parts, all of which would hurt its gross margin by 1 percentage point.
TSMC said it does not comment on its pricing policies.
A version of this article was first published by Nikkei Asia on May 10, 2022. ©2022 Nikkei Inc. All rights reserved.
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