Apple finally agreed to TSMC’s price increase request
Apple’s orders account for about 25% of TSMC’s annual revenue, which has driven the latter’s research and development work in advanced semiconductor manufacturing technology in the past few years and has considerable bargaining power. Even so, Apple did not take advantage of the negotiation, and TSMC did not intend to make concessions on price. It is rumored that Nvidia has similar plans and has been waiting for the results of negotiations between Apple and TSMC. With Apple capitulating to TSMC’s demands, Nvidia’s plan to cut costs by driving down TSMC’s order prices is largely hopeless.
TSMC’s strong bargaining power largely comes from its huge customer base. Although the semiconductor industry has been hit by the recent downturn in the consumer market, such as graphics cards, smartphones, and storage devices, there is still relatively strong demand in some segments, such as automotive, HPC, and data centers.
According to industry insiders, there are other reasons why customers are willing to accept TSMC’s request for price increases. During the previous period of semiconductor supply shortage, TSMC’s price increase was not large in wafer foundries. At the same time, with global inflation intensifying, the current increase of around 5% is reasonable.
Recently, AMD released its preliminary financial results for the third quarter of 2022, with estimated revenue of approximately $5.6 billion, a significant decrease of $1.1 billion compared to expectations, and a decline in shipments. Some analysts believe that the situation encountered by AMD is the epitome of the semiconductor industry, which may affect TSMC’s orders in the future, and its revenue will become less stable. It is reported that TSMC’s 6nm/7nm capacity utilization rate is declining. As costs have increased, TSMC has also slowed the adoption of new technologies because it takes longer to recover capital expenditures.