TSMC Raises Prices Across Its Advanced Chip Lines
TAIPEI—Taiwan Semiconductor Manufacturing Co. has told customers it will raise prices across every advanced manufacturing node it sells, touching the 3-nanometer, 5-nanometer and 7-nanometer processes that together generate roughly 74% of its revenue, according to people familiar with the matter.
The increases, delivered to chip designers in recent days, are the broadest repricing of the company’s most advanced capacity since the artificial-intelligence boom began straining its factories. Buyers were told the new terms apply to future wafer orders and that the scale of the increase varies by node and by the volume a customer commits to, the people said.
TSMC declined to comment on pricing. The company separately reaffirmed that its A16 process, a next-generation node built around a redesigned power-delivery architecture, remains on track to enter production at the end of 2026. The reassurance came as investors questioned whether demand for leading-edge chips can absorb both higher prices and a wave of new capacity.
Shares of TSMC fell more than 6% on Wednesday, caught in a broad selloff of semiconductor stocks. The decline erased the week’s earlier gains and left the stock well below its June high, a sign that pricing power alone no longer carries the shares.
The repricing lands at a delicate moment for the industry. Broadcom Inc., one of TSMC’s largest customers, warned this week that the foundry’s capacity has become the single biggest constraint on AI chip supply, with orders for accelerators outstripping the wafers available to build them. Executives at Broadcom have told investors privately that allocations, not designs, now decide who ships what, according to people familiar with the discussions.
“For the first time in this industry’s history, the binding constraint is not engineering talent or intellectual property. It is wafers,” said one semiconductor supply-chain executive. Analysts echoed the point, noting that every advanced wafer TSMC can produce through 2027 is already spoken for by long-term agreements.
The price increases reflect a shift in bargaining power that has been building for three years. For most of the past two decades, TSMC’s customers—Apple Inc., Nvidia Corp., Advanced Micro Devices Inc., Qualcomm Inc. and Broadcom—could play rival foundries against one another. Samsung Electronics Co. and Intel Corp. offered alternatives, and volume buyers extracted concessions on nearly every order.
That option has largely disappeared. Samsung has struggled to match TSMC’s yields on advanced nodes, and Intel’s foundry business has yet to win meaningful AI work. With no credible second source for the most advanced silicon, customers have signed multiyear agreements that lock in capacity and, increasingly, price. One executive at a large chip designer said his company’s purchasing team now treats TSMC’s quarterly price letters the way utilities treat rate cases: as unavoidable.
The new pricing touches the nodes that anchor the AI buildout. The 3nm line, which hosts Nvidia’s newest accelerators and Apple’s latest processors, carries the steepest increases, people familiar with the matter said. The 5nm and 7nm families, which serve everything from smartphones to data-center networking chips, rise by smaller amounts. Customers that prepaid for capacity in earlier rounds were told their contracts will be repriced at renewal.
TSMC’s own financials explain the urgency. The company expects capital spending of roughly $40 billion this year, much of it dedicated to new fabs in Taiwan, Arizona and Japan. Gross margins, the most watched metric in the foundry business, have come under pressure as the company absorbs construction costs, higher electricity prices in Taiwan and the drag of a stronger dollar. Executives have made clear that price is the primary lever for protecting profitability in the years ahead.
Customers have limited room to object. Nvidia, which depends on TSMC for nearly all of its most advanced silicon, has already prepaid for capacity through multiyear agreements. Apple, the foundry’s largest customer by revenue, has no practical alternative for its flagship processors. Even government-subsidized competitors acknowledge that matching Taiwan’s economics takes years, if it happens at all.
The price move also tests how far buyers will go to diversify. Washington, Tokyo and Brussels are pouring subsidies into local fabs partly to loosen TSMC’s grip on the supply chain. But a new leading-edge fab takes three years to stand up and longer to reach competitive yields, and no customer has yet signed the volume commitments that would make a second source viable.
Analysts said the increases could add a few percentage points to the cost of every AI server shipped in 2027, a cost that will ripple through cloud pricing and, eventually, the price of AI services. For now, the industry is adjusting to a world in which the foundry sets the terms. “When every advanced wafer is spoken for, the industry stops competing on design and starts competing on capacity,” the supply-chain executive said.
