TSMC will raise chip prices that are made outside of Taiwan

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A recent report from the Financial Times claims that the World’s largest chip maker, TSMC, may raise the prices of its products that are manufactured outside Taiwan, its home country. For those unfamiliar, over 90 percent of the world’s most advanced chips are fabricated in the country.

TSMC CEO CC Wei said on an earnings call (transcript) that if a customer is required to be in a certain geographical area, the customer will need to share the incremental cost. “In today’s fragmented globalization environment, cost will be higher for everyone, including TSMC, our customers, and our competitors,” he added.

TSMC CEO informs an upcoming rise in chip prices

Notably, most of the semiconductor manufacturers like Apple, Nvidia, Qualcomm, and AMD fabricate their chips from TSMC. The Chinese giant Huawei also used to fabricate their chips from TSMC before the export restrictions from the US came into place. Only a few companies, like Samsung and Intel, produce their chips in-house. It includes Samsung, Intel, and only a few others. A rise in prices from TSMC is likely to reflect on a range of products. Specifically, if device manufacturers decide to maintain their profit margin.

Now if TSMC manufactures most of the chips in their home country, then why is it even a problem in the first place? Well, under the current geopolitical situation, governments and companies are pushing the chipmaker to build their plants and start fabricating chips outside Taiwan.

The US government offered TSMC $6.6 billion in funding last week under the CHIPS ACT to work on their factories in Arizona. In response, TSMC committed to increasing its US investment by an additional $25 billion, bringing the total to $65 billion. However, the new production facilities might not function as efficiently as their existing plants. TSMC is also investing quite a lot to build plants outside Taiwan.

It’s important to mention, that TSMC has plants in Japan. They are also building a number of plants in Arizona, one of them has already started operating this month. This plant may start full production by the end of this year. So in the near future, TSMC may start mass-producing chips outside Taiwan. Which it says, will raise the prices of the products.

TSMC’s chipmaking cost in Taiwan may also increase

If all of these weren’t enough, TSMC’s chip manufacturing costs in Taiwan may also increase. Thanks to the recent electricity price hikes in Taiwan and the disruptions due to the recent earthquake. According to a recent report, TSMC estimates losses of $92.4 million due to the biggest earthquake in at least 25 years.