TSMC to Raise Foundry Prices by Up to 10% Next Year as AI Demand Drives Costs Higher

Taiwan Semiconductor Manufacturing Co., the world’s largest contract chipmaker, plans to raise foundry and service prices by as much as 10% starting next year as AI-driven demand for advanced semiconductors outstrips supply and raw-material and equipment costs climb. The industry expects chip prices to stay firm as the AI supercycle continues.

Nikkei Asia reported on July 21, citing multiple sources, that TSMC will increase contract manufacturing and service prices by 5% to 10% from early next year, depending on the customer and the product. People familiar with the matter said the company has decided to raise prices for both advanced and mature-node chips.

For mature-node products, including 12-nanometer, 16-nanometer and 28-nanometer processes, TSMC plans to raise prices by as much as 10%. Mature-node chips accounted for about 23% of second-quarter revenue. For additional orders of high-performance computing chips that exceed demand forecasts, TSMC plans to add a 10% to 15% surcharge on top of the base increase.

As a result, the total price increase for some advanced chips could exceed 10%, the people said. Price negotiations began in June and wrapped up in July, with the higher prices set to take effect early next year.

TSMC told Nikkei Asia it does not comment on pricing. The company said its pricing strategy is strategic rather than opportunistic and that it will continue working closely with customers while charging prices that reflect the value of its services.

The price increases come as inflationary pressure spreads through the technology supply chain, lifting costs across the semiconductor industry for products and services such as fiberglass materials, printed circuit boards and packaging.

Chief Financial Officer Wendell Huang said on a recent conference call that the company could not rule out price increases as inflation pushes up costs. Chairman C.C. Wei also addressed the issue, saying TSMC would not suddenly raise prices fourfold or fivefold because customers would struggle to absorb such increases.

TSMC also reaffirmed plans to expand investment in the US, saying long-term demand for AI chips remains strong. Huang said customer demand is structural in nature and will support continued investment.

He said construction of TSMC’s Arizona chip plants is progressing at a very satisfactory pace and that the company plans to increase its investment there by $100 billion from its previous plan, bringing the total to $265 billion. He added that strong customer demand is expected to continue for years.

If the investment proceeds as planned, TSMC will build 10 semiconductor fabrication plants, two advanced packaging plants and one research and development center in Arizona. The first plant is already operating, equipment is about to be moved into the second plant, and the third plant is under construction. Groundwork has also begun on the fourth plant and the first advanced packaging facility.

Huang ruled out raising funds in the US through a new share sale, but said the company would not exclude issuing new corporate bonds if market conditions are favorable.

TSMC is expanding investment because it expects demand for AI chips to exceed production capacity for some time. North American customers, including Nvidia and AMD, accounted for 78% of TSMC’s total revenue last quarter. The company plans to raise capital spending to at least $60 billion this year.

TSMC posted second-quarter net income up 77% from a year earlier, while revenue rose 36%, beating market expectations. The gains were driven by a surge in demand for AI chips. The company has now posted record quarterly net profit for five consecutive quarters.

Kang Kyung-ju, Hankyung.com reporter qurasoha@hankyung.com