Rising manufacturing costs could soon make advanced chips more expensive across the technology industry, as Taiwan Semiconductor Manufacturing Co. (TSMC) reportedly prepares to raise manufacturing prices by up to 10% next year, Reuters reported.
TSMC is unlikely to issue a single 10% increase across all manufacturing, with some reports suggesting rises of between 5% and 10%. The price hike would affect both advanced and mature semiconductor manufacturing deals.
Dutch photolithography manufacturer ASML has also been discussing price increases for its extreme ultraviolet lithography (EUV) machines, which are indispensable to TSMC’s manufacturing process. Although TSMC has reportedly pushed back against ASML’s proposed increases, it may be preparing for that scenario with its own price rise.
TSMC manufactures chips for Nvidia, Apple, and other major tech companies. It holds about 70% of the semiconductor foundry market, with an especially high share of the advanced semiconductor market, according to Counterpoint Research.
When contacted by Reuters on Tuesday, a TSMC spokesperson declined to comment on the company’s pricing.
Rising capex is quietly driving up prices
Expanding manufacturing beyond Taiwan is also becoming more expensive. TSMC recently committed another $100 billion to its U.S. operations, bringing planned investment there to $265 billion—a capital-intensive expansion that adds to the company’s long-term cost pressures.
The company has been partly pushed into increasing its investment, as the U.S. government has tightened chip controls and encouraged the Taiwanese manufacturer to establish more capacity outside the country. Several U.S. customers have also pressed TSMC to expand beyond Taiwan, with Apple reportedly looking elsewhere to reduce its reliance on the company.
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Expect market-wide price increases
Part of the reason TSMC gained such a dominant position was its cost relative to other foundries. At a time when many consumer electronics manufacturers were looking to move away from owning their own factories, TSMC attracted customers with the lower cost of outsourcing production, alongside its manufacturing yields and technological progress.
While the increase is unlikely to faze its largest customers too much, it may encourage them to look elsewhere for some manufacturing capacity. According to previous reports, TSMC already has a significant backlog due to surging demand from AI companies, many of which are developing custom chips for installation in data centers.
The increases are likely to feed through into a wide range of consumer electronics, meaning smartphones, laptops, games consoles, and other products may see further price rises next year. That would be a double blow for consumers who have already faced price hikes from Apple on almost everything except the iPhone, Microsoft’s Xbox division, and others due to memory shortages.
Those higher manufacturing costs are likely to ripple through the technology industry, increasing prices for AI hardware, smartphones, laptops, gaming consoles, and other electronics that rely on TSMC’s manufacturing capacity.
Other News: Apple reportedly came closer than expected to reviving the Mac Pro, but high costs and weak demand led it to scrap powerful M2 and M3 Extreme chips before shifting its focus entirely to the Mac Studio.