Taiwan Semiconductor is expected to increase its 5/3nm process pricing by 3% to 8% in 2025

According to the financial news app Zhitong Finance, Taiwan Semiconductor (TSM.US) is reported to raise its foundry prices for 5nm and 3nm process chips in 2025. The report cited sources familiar with Taiwan Semiconductor, stating that the leading global chip manufacturer has informed customers that prices are expected to increase by 3% to 8%.

Taiwan Semiconductor's financial report released last month showed that Q2 revenue was NT$673.51 billion (approximately US$20.82 billion), a year-on-year increase of 40.1% and a quarter-on-quarter increase of 13.6%, exceeding analysts' average expectations of 35.5% year-on-year growth; net profit was NT$247.845 billion, a year-on-year increase of 36.3% and a quarter-on-quarter increase of 9.9%, higher than analysts' average expectation of NT$235 billion.

Q2 gross profit was NT$358.125 billion, a year-on-year increase of 37.6% and a quarter-on-quarter increase of 13.9%; gross margin was 53.2%. Operating profit was NT$286.556 billion, a year-on-year increase of 41.9% and a quarter-on-quarter increase of 15.1%; operating margin was 42.5%. Earnings per share were NT$9.56, higher than NT$7.01 in the same period last year and NT$8.70 in the previous quarter; earnings per ADR were $1.48.

In the financial report, Taiwan Semiconductor pointed out that in the second quarter, revenue contribution from the 3nm process accounted for 15% of total revenue, while revenue contributions from the 5nm and 7nm processes accounted for 35% and 17% of total revenue, respectively; revenue contribution from advanced technology (defined as 7nm and more advanced process chips) accounted for 67% of total revenue.

Taiwan Semiconductor also stated that the current capacity utilization rate for the 5/3nm process chips has reached 100%. The 3nm process chips will gradually increase production capacity from 100,000 wafers per month to approximately 125,000 wafers per month in the second half of the year to meet the accelerated production expansion needs of various manufacturers.

Taiwan Semiconductor remains the core chip foundry manufacturer for fabless chip design companies such as Apple, NVIDIA, AMD, and Broadcom, especially for data center server-side AI chips manufactured for NVIDIA and AMD, which are considered the key hardware infrastructure for driving large artificial intelligence training/inference systems behind tools like ChatGPT.

The almost endless demand for NVIDIA's AI chips has provided support for Taiwan Semiconductor's performance. Meanwhile, the broader smartphone market is on the path to recovery. Apple is planning to launch at least 90 million iPhone 16 devices in the second half of 2024, hoping to stimulate demand for the new product line with AI services, aiming for a significant rebound after experiencing soft iPhone demand in 2023. This will also boost Taiwan Semiconductor's performance as the chip manufacturer for Apple.

With decades of semiconductor manufacturing technology accumulation in the chip manufacturing field and long-term leadership in chip manufacturing technology improvement and innovation (pioneering the FinFET era and leading the 2nm GAA era), Taiwan Semiconductor has dominated the majority of global chip foundry orders with its advanced processes and packaging technologies, as well as extremely high yields, especially for orders of chips with advanced processes of 5nm and below. The market currently believes that the demand for advanced process chips driven by the AI boom will enhance Taiwan Semiconductor's bargaining power