TSMC’s price increase will make its gross profit margin catch up with Intel

Recently, it has been reported that TSMC is preparing to increase the price of chip orders from 2022. It is rumored that the production price of 7nm or more advanced wafers will increase by 10%, and the production price of 16nm or above wafers will increase by 20%. In TSMC’s second-quarter 2021 financial report, N5 and N7 process nodes accounted for 49% of revenue, while N16 and N28 process nodes accounted for 25% of revenue during the same period. It is believed that price increases will further increase revenue and profits.

As the current leading foundry, TSMC’s every move will affect the entire industry. Investment institutions believe that, in addition to bringing more positive profitability to TSMC’s current price increase, its gross profit margin will also catch up with Intel. According to The United Daily News (UDN), HSBC’s investment department estimates that after this price adjustment, the average price (ASP) of TSMC’s various process nodes will rise by an average of 15%, TSMC’s revenue will increase by at least 22%, and the gross profit margin may increase to about 55%.

TSMC’s gross profit margin in 2020 is 53%, and Intel’s is 56%. By the first half of this year, TSMC and Intel’s gross profit margins were 51.2% and 56%, respectively. Since the impact of the price adjustment will not be reflected in the fourth quarter of this year’s revenue, it will have little impact on this year’s revenue and gross profit margin.

Intel proposed the “IDM 2.0” strategy this year, announcing that it will build a world-class Intel foundry service (IFS) and expand the use of third-party foundry production capacity. It is rumored that Intel has seized most of TSMC’s orders for 3nm process nodes for next-generation chips in the server and graphics fields. In the future, the relationship between Intel and TSMC is both a partner and a competitor.