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TSMC plans another price hike amid inflation concerns

Chip titan warns clients of second increase since 2021, citing rising costs

TSMC, the world's biggest contract chipmaker, is planning to raise prices by "single-digit percentages," multiple industry sources say.     © Reuters

TAIPEI -- 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 hike will take effect by the beginning of 2023, they said.

Two people said the price increases will be about 5% to 8% for different process technologies, from cutting-edge to legacy nodes, making products from advanced processors, connectivity chips and sensors, to microcontrollers and power management ICs.

"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 like smartphones and PCs, it might be difficult for clients to fully accept TSMC's planned price hike. "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 hike also reflects the hefty costs of TSMC's own expansion push: It is spending $100 billion through 2023 to increase capacity, with $40 billion to $44 billion earmarked for this year alone.

TSMC's notification comes less than a year after its biggest price hike in a decade. Last August, it told its clients it would increase prices up to 20% 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 practice of lowering prices each quarter for its chip design clients after their products go into mass production and the process is running smoothly.

TSMC Chairman Mark Liu in March said all semiconductor players have been directly impacted by the rising prices of components and materials, which are 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 like 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 labor, materials and energy, as well as additional fees for securing parts, all of which will hurt its gross margin by 1 percentage point.

TSMC said it does not comment on its pricing policies.

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