tsmc 20% price increase

According to the Industrial and Commercial Times, a Taiwan, China based media, TSMC's 3nm supply falls short of demand, and seven major customers, including Apple and NVIDIA, are fully committed to production capacity. It is expected that orders will be stabilized until 2026. It is reported that TSMC's 3-nanometer contract price adjustment is expected to exceed 5%, and the annual quotation for advanced packaging will also increase by about 10% to 20% next year.

According to internal sources in the supply chain, in addition to the bullish price of 3 nanometer contract manufacturing, advanced packaging capacity is also expected to rise simultaneously. Since its launch, TSMC Zhunan Advanced Packaging Plant (AP6) has become the largest CoWoS (Chip on Wafer on Substrate) production base in Taiwan with the gradual arrival of AP6C equipment. It is expected that the monthly production capacity of CoWoS will significantly increase from 17000 pieces to 33000 pieces in the third quarter, achieving a doubling of production capacity.

With the widespread application of billions of AI training models, high-performance computing data centers are constantly increasing the demand for AI accelerator hardware, which also makes the advanced packaging capacity of CoWoS continue to be tight. Industry experts believe that although AI accelerators do not adopt cutting-edge advanced processes, they highly rely on advanced packaging technology. Therefore, who can grasp more advanced packaging production capacity from TSMC will directly determine its penetration rate and competitiveness in the market.

Against the backdrop of TSMC's scarce advanced packaging capacity, NVIDIA, as one of its main customers, has a particularly urgent demand for advanced packaging capacity, accounting for about half of its production capacity. AMD followed closely behind, while companies such as Broadcom, Amazon, and Marvell actively stated that they will adopt advanced packaging processes. It is worth noting that although Nvidia's gross profit margin is close to 80%, in order to ensure more advanced packaging capacity, it did not choose to give up new production capacity, but adopted a strategy of agreeing to price increases to widen the gap with competitors.

In terms of supply chain, it has been confirmed that TSMC has planned to introduce more related equipment in the third quarter to expand CoWoS production capacity, and has requested equipment manufacturers to send more engineers to factories such as Longtan AP3, Zhunan AP6, and Zhongke AP5. In addition to the AP6C at Zhunan Factory, Zhongke Factory originally only carried out the post stage oS process and will gradually transition to the CoW process. The Chiayi factory is in the early preparation stage, and it is expected that the progress will surpass that of the Causeway factory.

Industry experts predict that the prices of advanced process nodes such as 3 nanometers and 5 nanometers will also face adjustments. Especially in the second half of the year, orders for 3 nanometers are strong, with crop growth rates approaching full load and expected to continue until 2025. Similarly, driven by the demand for AI, the 5-nanometer process has also shown a similar trend.

Overall, the supply shortage of advanced packaging capacity is expected to continue until 2025. According to preliminary estimates, the market demand next year will exceed 600000 pieces, while TSMC's supply is expected to be 530000 pieces. This means that there is still a production capacity gap of about 70000 pieces in the market, so the price of advanced packaging is expected to further increase.