TSMC (TSM, Financial) is reportedly planning significant increases in its 2025 foundry prices to mitigate the impact of high operating costs at overseas facilities and the deployment costs of its 2nm technology. According to industry insiders, the new pricing for 5nm, 4nm, and 3nm processes will rise more than the initially projected 4%, with some increases going as high as 10%. The 2nm process pricing will soar to $30,000.
For different sectors, the increase in high-performance computing (HPC) orders, including AI, will range between 8-10%, while smartphone-related orders may see a 6% rise. This year has already seen a 3-6% increase in the pricing for processes below 7nm, while those above 16nm have largely remained stable.
The media also reports that the 2nm plant, set to commence significant production output in the fourth quarter of 2025, will have a monthly capacity of 30,000 wafers. TSMC's price hikes are likely driven by its dominant position in the chip foundry market and potential pressures on its gross margins.
Despite challenges faced by competitors like Samsung and Intel in terms of process technology and yield rates, TSMC maintains a significant pricing advantage amid robust AI demand. Downstream chip manufacturers are keen to secure their production needs, granting TSMC greater pricing power.
Additional factors such as increased costs of overseas plant expansion, the transfer and deployment of advanced process capacities, rising electricity prices in Taiwan, and general inflation are expected to dilute TSMC's gross margin by around 1% next year. These factors are believed to justify the price hikes as a means to offset potential losses.
Moreover, NVIDIA's previous order for Super Hot Run (SHR) chips, a series of AI processors intended for the Chinese market to be fulfilled in the first quarter of 2024, may have contributed to the elevated foundry prices.
However, insiders also pointed out the difficulties in passing these costs onto customers, given the slow recovery of the PC and smartphone markets.
