TSMC, the world's leading chipmaker, plans to increase prices for chips produced outside of Taiwan, which could raise costs for various devices. The company's first plant in Arizona is gearing up for mass production later this year.
HSINCHU, TAIWAN - SEPTEMBER 16: Taiwan Semiconductor Manufacturing Company, Limited (TSMC), the world's most valuable semiconductor company, at Hsinchu Science Park on September 16, 2022, in Hsinchu, Taiwan. (Photo: Annabelle Chih/Getty Images)
Price Hikes for Chips Made Outside Taiwan
TSMC is poised to implement price hikes for chips manufactured outside of Taiwan, a move that could potentially drive up the prices of various electronic devices. This decision comes as TSMC prepares to launch its first-ever plant in Arizona, which is expected to begin full-scale production later this year.
TSMC's chips are essential components in smartphones, gaming consoles, and computers. However, products using chips manufactured outside of Taiwan may see price hikes due to higher production costs.
During an earnings call, TSMC CEO CC Wei explained that if customers prefer chips produced in specific regions, they must cover the additional expenses. He emphasized that in today's globalized economy, increased costs are inevitable for all parties involved, including TSMC, its customers, and competitors.
Discussions regarding price adjustments with clients have commenced. Financial Times highlights that manufacturing chips outside of Taiwan, where the majority of the world's advanced semiconductors are produced, incur higher costs for TSMC.
However, the company intends to transfer these expenses. This move comes amidst efforts by corporations and governments to enhance chip supply beyond Taiwan, which faces control attempts by China.
TSMC operates plants in Japan and is in the process of constructing several facilities in Arizona. The initial plant in Arizona commenced operations this month and is slated for full-scale production later this year. Additionally, the company is establishing a plant in Germany.
Additionally, the US government recently approved $6.6 billion in funding for the company through the CHIPS Act, aimed at strengthening semiconductor manufacturing domestically. In response, TSMC committed to increasing its investment in the US by $25 billion, bringing the total to $65 billion.
In line with this, the company revealed intentions to construct a third plant in the US by the end of the decade and to commence production of more advanced 2nm chips by 2028.
TSMC's Response to Mounting Pressures
In recent developments, TSMC is facing mounting pressures on multiple fronts, potentially impacting its operations and profitability.
Firstly, the company anticipates increased manufacturing costs in Taiwan, largely attributed to surging power prices and the aftermath of a recent earthquake. These factors pose challenges to maintaining cost efficiency and could affect TSMC's bottom line.
Moreover, TSMC's efforts to enhance efficiency in producing its most advanced 3nm chips are encountering hurdles, further complicating its operational landscape. As TSMC grapples with these challenges, its prominent clients, including tech giants like Apple, NVIDIA, AMD, and Qualcomm, could be affected.
If these clients choose to procure chips from TSMC's facilities outside Taiwan, such as those in the US, Japan, or Germany, they may face higher manufacturing costs. Consequently, there's a potential ripple effect where device manufacturers may be compelled to absorb these increased expenses to safeguard their profit margins.
