TSMC’s US factory order quotation maybe 30% higher, Japanese factories will also be 15% higher

Owing to a variety of factors, Taiwan Semiconductor Manufacturing Company (TSMC) is currently constructing and expanding foundries worldwide; however, the cost is not economically advantageous and heavily relies on local government incentives in areas such as utilities, land, and tax reductions. If the ultimate expenses surpass expectations or additional operational costs arise, these will invariably be passed on to the customers.

As reported by DigiTimes, TSMC’s newly-built foundries in the United States and Japan are projected to commence operations by the end of 2024, with discussions regarding orders and quotations already underway with clients. Industry insiders assert that chips produced in TSMC’s American plant, employing 4nm/5nm technology, are priced 20-30% higher than those manufactured in the company’s Taiwanese facilities. Although the Japanese plant initially utilizes mature 22nm/28nm technology, its prices exceed those of Taiwanese factories by 10-15%.

Elevated costs will undoubtedly impact order volume and weaken competitive advantage, potentially resulting in TSMC’s American plant catering to less price-sensitive chips. The situation in TSMC’s Japanese plant appears more favorable due to smoother negotiations with local clients, primarily attributed to increased support from local government policies.

In light of higher operational costs for new foundries in the United States and Japan, TSMC has voiced multiple complaints, and to maintain a 53% gross margin target, price increases are inevitable. As Samsung’s 5nm and smaller processes improve in terms of yield rate, numerous manufacturers plan to shift some orders to Samsung for enhanced flexibility in capacity and cost control. Rumors suggest that AMD and Qualcomm are considering partnering with Samsung, while Nvidia may seek Intel’s foundry services.

TSMC’s largest client, Apple, constitutes a quarter of its revenue and enjoys a 20-30% discount. This is due to Apple’s close collaboration with TSMC in advancing process development and technological breakthroughs, coupled with Apple’s willingness to adopt cutting-edge manufacturing nodes, pay additional fees, and assume greater risks.