TSMC, the world's largest foundry, will raise prices for advanced and mature nodes by up to 10% starting next year. The move is seen as reflecting the burden of expense from growing demand for artificial intelligence (AI) chips and investments in overseas production bases.
According to a Nikkei Asia report on the 22nd, TSMC recently wrapped up price talks with major clients and decided to apply a new pricing framework starting next year.
For advanced nodes at 7 nanometers (nm) and below, base prices will rise 5% to 10% depending on the client and product. In particular, if a client places additional orders for high-performance computing (HPC) chips beyond the originally contracted volume, a 10% to 15% surcharge will be added on top of the base increase. As a result, the actual price hike for some AI Semiconductor chips is expected to exceed 10%.
Mature nodes such as 12, 16 and 28 nanometers are also subject to increases of up to 10%. However, some products are said to face smaller hikes.
TSMC began price negotiations with major clients in June, finished them this month, and plans to apply the higher prices from early next year.
In the industry, some say TSMC proposed a hike milder than the market expected. By pushing the start of the price increase to next year, the company gave clients time to adjust production plans and product prices, analysts said.
TSMC's major clients include global big tech and fabless companies such as Nvidia, Apple, Google, Amazon, Qualcomm, Arm and MediaTek.
Amid expanding AI investment, price hikes are spreading across the semiconductor supply chain. Intel and AMD have raised prices for AI server chips, and VIS, a TSMC-affiliated foundry, and UMC, Taiwan's No. 2 foundry, have also raised prices citing higher costs.
The industry also sees expanded investment in AI data centers leading to higher prices for fiberglass and printed circuit boards (PCB), advanced packaging, and memory such as DRAM and NAND flash.
TSMC also acknowledged the burden of expense from expanding overseas plants. Chief Financial Officer (CFO) Wendell Huang said at a recent earnings briefing that expanding the Arizona plant in the United States and ramping up mass production on the 2-nanometer node will weigh on profitability for the time being. The company increased its Arizona investment by $100 billion from the original plan and raised this year's capital expenditure (CAPEX) to as much as $64 billion.
Chair Mark Liu of TSMC said, "We do not choose a method of raising prices by four to five times at once," adding, "The principle is to secure appropriate revenue at a level that allows us to grow with customers over the long term."
Regarding reports of price hikes, TSMC said, "We do not disclose pricing policies," but added, "Our principle is to create value with customers based on a long-term strategy, not opportunism," Nikkei Asia reported.