According to the latest news, the outsourcing quotes for Taiwan Semiconductor's 5nm, 4nm, and 3nm processes in 2025 have seen a price increase of about 4% higher than previously estimated. Among them, the increase in business orders for HPC, including AI, is around 8% to 10%.

Analysts pointed out that as the world's largest chip manufacturing factory, Taiwan Semiconductor's "better than expected" price hike may indicate that the demand for the global semiconductor industry chain is still very strong. The well-known research institution Gartner predicts the global semiconductor market for 2024, with global semiconductor market revenue expected to grow by 16.8% to reach $624 billion; in 2025, global semiconductor market revenue is expected to increase by 15.5% to reach $721 billion.

Chairman Wei Zhejia of Taiwan Semiconductor recently stated that the demand for AI is real, overall chip demand is stabilizing, and improving. In dollar terms, it is expected that its full-year revenue in 2024 will increase by nearly 30%.

Taiwan Semiconductor's price hike

On October 25th, according to Taiwan Electronic Times, industry insiders stated that in order to reduce the impact of high operating costs in overseas factories and the deployment costs of 2nm on gross margins, Taiwan Semiconductor recently released 2025 foundry quotes to multiple customers. Depending on customers, products, and capacity scale, the foundry quotes for 5nm, 4nm, and 3nm processes have increased by about 4% more than previously estimated, up to 10% in the highest case, and the foundry quote for 2nm has surged by 0.03 million dollars.

On various platforms, the increase in business orders, including HPC such as AI, is about 8% to 10%, while the increase in smart phone business orders is around 6%.

This year, Taiwan Semiconductor's foundry quotes for processes below 7nm have increased by 3% to 6% compared to last year, with most above 16nm remaining mostly stable.

The report also added that the outsourcing quote for the 2nm Baoshan factory, which is expected to officially start production in the fourth quarter of 2025, has been released, with a monthly capacity of 0.03 million pieces.

Media analysis suggests that taiwan semiconductor's continuous price hikes may be mainly due to its dominant position in the chip outsourcing sector and the possible erosion of its gross margin.

Currently, Samsung Electronics and Intel still face issues of lagging processes and low yields. Taiwan semiconductor stands alone in the chip outsourcing sector. With strong demand for AI and downstream chip manufacturers continuously competing for production capacity, taiwan semiconductor still holds significant pricing power.

Furthermore, considering factors such as the increasing production costs of overseas factory construction, the transfer and deployment costs of advanced processes, the comprehensive increase in electricity prices in Chinese Taiwan, and inflation, the media predicts that taiwan semiconductor may experience a 1% dilution in gross margin next year. This also provides a reason to support taiwan semiconductor's price increases to offset losses.

In addition, nvidia's previous order of SHRs (Super Hot Run, urgent orders) may have partially pushed up the OEM prices. At the end of last year, nvidia placed an order with taiwan semiconductor for the sale of artificial intelligence processors to china, with plans to start delivery in the first quarter of 2024.

However, the above industry insiders pointed out that due to the slow recovery of the PC and smart phone markets, Taiwan Semiconductor continues to raise its outsourcing quotes, making it difficult to pass on to customers.

It is worth mentioning that there is also high demand for Taiwan Semiconductor's 3nm process. Industry insiders indicate that driven by AI servers and high-speed computing applications, as well as the AI-driven advancement of high-end smart phones, Apple, Qualcomm, Nvidia, and AMD are reportedly securing a large share of Taiwan Semiconductor's 3nm process capacity, leading to a surge in customer queues.

Renowned research firm Gartner predicts the global semiconductor market revenue in 2024 to grow by 16.8%, reaching 624 billion USD. In 2025, global semiconductor market revenue is projected to increase by 15.5%, reaching 721 billion USD. Gartner believes that the growth of the global semiconductor market in 2024 will mainly be driven by the storage chip industry, with storage chip industry revenue expected to grow by more than 40%, reaching around 130 billion USD. Additionally, the development of Generative AI (GenAI) and large language models is also driving demand for high-performance servers and accelerator cards in data centers, further promoting the growth of the semiconductor market.

Guidance from Taiwan Semiconductor

According to the latest financial report released by Taiwan Semiconductor, the company's third-quarter revenue was 759.69 billion New Taiwan Dollars (approximately 23.5 billion U.S. dollars), a year-on-year increase of 39%; net profit for the quarter reached 325.258 billion New Taiwan Dollars (approximately 10.1 billion U.S. dollars), a year-on-year increase of 54.2%, both figures exceeding market expectations.

During the period, the company achieved a gross margin of 57.8%, up 4.6 percentage points quarter-on-quarter and 3.5 percentage points year-on-year, a gross margin performance significantly higher than the expected range of 53.3%-55.5% provided by the management in the previous financial report season. Management pointed out that this was due to higher capacity utilization and more favorable exchange rates.

Analysts pointed out that as the world's largest chip foundry, in addition to financial data and market value growth, the more surprising aspect of Taiwan Semiconductor is the 'significantly higher than expected' performance guidance and the positive boost to the semiconductor large cap.

During the earnings conference call last week, Taiwan Semiconductor Chairman Wei Zhejia stated that in U.S. dollars, it is expected that the company's full-year revenue will grow by nearly 30%, with revenue growth in the second quarter expected to slightly exceed the midpoint of the 20% range in U.S. dollars.

Wei Zhejia also emphasized that the demand for AI is real, overall chip demand is stabilizing, and showing signs of improvement.

At the same time, there was also positive news from Taiwan Semiconductor's factories in the United States.

According to Bloomberg, on Friday local time, citing insiders, Rick Cassidy, President of Taiwan Semiconductor's U.S. division, revealed on Wednesday that the yield of the trial production at Taiwan Semiconductor's Arizona plant exceeded that of its counterpart in Taiwan by about 4 percentage points.

Yield refers to the proportion of qualified products in the production of chips, which is one of the key measurement standards in the semiconductor industry. Generally speaking, the higher the yield, the higher the production rate.

During last week's earnings call, Wei Zhejia stated: "Our first wafer fab in the United States began using 4nm process technology for engineering wafer production in April, and the results are very satisfactory, with a very high yield."

According to the plan, TSMC will build three wafer fabs in Phoenix, Arizona, USA. Fab 21 is a 4nm process wafer fab, Fab 22 is a 3nm wafer fab, and Fab 23 is expected to use 2nm or more advanced process technology for production by the end of the 2020s (2029-2030).

TSMC originally planned to fully start production at its first Arizona factory in 2024, but due to a lack of skilled workers, this target has been postponed to 2025, and the startup date for Fab 22 has been delayed from 2026 to 2027-2028. This move has raised concerns about the production efficiency of TSMC's US factories.

Editor/rice