TSMC Hikes Wafer Prices by 12% Despite Slump

Amid an unprecedented semiconductor crunch, TSMC, the world’s leading semiconductor foundry, has taken the unusual step of raising its prices. The increase is thought to be driven by a growing clientele for advanced semiconductors of 5 nm or smaller and increased confidence in the technology to cater to these demands. Samsung Electronics, hot on TSMC’s heels, has gambled on lower prices, but there remains a gap in terms of technology and production capacity according to industry insiders.

According to TSMC on July 24, the company’s per-wafer selling price (based on a 12-inch conversion) in Q2 was US$5,377 (6.9 million won). This figure is a 12.48% increase from the average price (US$4,780) during the same period last year and a 3.7% rise from the previous quarter.

Traditionally, semiconductor companies lower wafer prices as they head into the off-season, a strategy aimed at attracting more customers and boosting sales. TSMC was no exception. The company’s Q2 sales plummeted by 13.7% year-on-year to US$15.68 billion. Although TSMC holds a 60% share of the global foundry market, it could not escape the recent slowdown in the semiconductor market, explaining why TSMC’s price hike is viewed as exceptionally unusual.

TSMC’s decision to raise prices despite the downturn is largely attributed to the influence of Artificial Intelligence. As the “generative AI” boom, driven by the likes of ChatGPT, sweeps the information technology market, demand for advanced semiconductors has risen. Looking at TSMC’s revenue structure, sales from the 7-nm and 5-nm processes, which are used to produce high-end chips like AI semiconductors, account for 53% of total sales. TSMC’s advanced 3-nm process, which has begun mass production, requires a payment of US$20,000 per wafer (approximately 25.65 million won). Despite the high cost, the world’s largest chip design companies, such as Nvidia and AMD, have lined up to utilize the company’s process in a bid to capture the AI market. It’s this supplier advantage that has allowed TSMC to increase prices. Despite a drop in sales, TSMC’s Q2 operating profit margin reached 42%.

Meanwhile, Samsung Foundry, the second-largest player in the market, is reportedly seeking to attract customers through a low-price policy compared to TSMC. However, catching up to TSMC’s process maturity, expertise, and packaging technology will require more time and expertise, according to assessments. An industry insider explained, “TSMC may be raising wafer prices, but its exceptional operation in terms of technology and production capacity means the world’s largest chip design companies have no choice but to form partnerships, even at a high cost.”