tsmc to hike chip prices amid rising AI demand
Taipei, Monday, 30 December 2024.
Starting January 2025, Taiwan Semiconductor Manufacturing Company (TSMC) will increase its advanced chip prices by 5-20% due to soaring demand for AI technology. This price adjustment reflects the growing pressure on TSMC’s manufacturing capabilities as demand outstrips supply. The company’s upcoming financial briefing on January 16, 2025, is expected to provide further insights into this pricing strategy. The price hike is poised to impact TSMC’s stock performance, given the crucial role semiconductors play in AI applications. The decision highlights the semiconductor industry’s challenges in meeting the burgeoning AI-driven market needs, which continues to reshape technology landscapes globally. TSMC’s move signals a broader trend of adjusting prices in response to market dynamics, with potential ripple effects across various sectors reliant on advanced semiconductor technology.
Market performance and financial outlook
TSMC’s strategic pricing move comes amid remarkable market performance, with the company’s stock surging over 90% in 2024 [2]. The semiconductor giant demonstrated strong financial results in Q3 2024, reporting revenue of $23.5 billion, marking a 36% year-over-year increase, while achieving an improved gross margin of 57.8% [2]. Market analysts project Taiwan’s semiconductor industry to exceed NT$6 trillion (US$186 billion) in production by the end of 2025, representing a 16.5% year-over-year growth, with TSMC expected to outperform this average [3].
Advanced manufacturing expansion
TSMC is aggressively expanding its manufacturing capabilities to meet AI chip demand. The company plans to construct its fourth and fifth wafer fabs (P4 and P5) in Kaohsiung by 2027 [4]. Its first Kaohsiung fab is scheduled to begin mass production of 2-nanometer chips in 2025, while the second fab will be completed in the same year [4]. Morgan Stanley analysts indicate that this expansion, coupled with strong demand, supports TSMC’s ability to implement significant price increases in 2025 [2].
Technology advancement and client relationships
TSMC’s technological progress extends beyond traditional chip manufacturing. The company has achieved integration of co-packaged optics with advanced semiconductor packaging, with sample deliveries planned for early 2025 [5]. Key clients Broadcom and NVIDIA are expected to be the first customers for these solutions [5]. The company’s chairman Wei has emphasized the genuine nature of AI demand [1], with major clients including Apple, Nvidia, and Broadcom benefiting from the AI infrastructure boom [2].
Geopolitical considerations
The upcoming U.S. presidential transition adds another layer of complexity to TSMC’s market position. With Donald Trump’s inauguration scheduled for January 20, 2025, market speculation centers on potential impacts of new tariff policies [3]. While TSMC may not face direct tariffs as its semiconductors go through system assembly manufacturers, analysts suggest that broader import duties could indirectly affect pricing and global economic dynamics [3].