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The cutting-edge chips that it will manufacture in its new plants in Arizona (USA) will be between 20 and 30% more expensive
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Morris Chang assures that the production costs of its plants located outside Taiwan will double in the future
TSMC currently maintains its business on a profit margin of approximately 53%, and according to Asian media it is not willing to sacrifice this to offer its customers the integrated circuits it produces inside and outside of Taiwan at the same price. DigiTimes Asia sources maintain that the cutting-edge chips that it will manufacture in its new plants in Arizona (USA) will be between 20 and 30% more expensive than ICs produced within Taiwan at the equivalent lithographic nodes.
However, they also anticipate that this company will maintain a discount of between 20 and 30% for its best client: Apple. According to Statista, in 2021, almost 26% of TSMC’s income came from the company led by Tim Cook, a figure much higher than the 5.8% linked to Mediatek, which was its second best client that year. That figure barely changed during 2022, so Apple’s relevance within TSMC’s customer portfolio has not been altered. In addition, those from Cupertino will be the first to adopt the Taiwanese brand’s upcoming integration technologies.
TSMC is not only building plants in the US; also in Germany and Japan
Morris Chang, the veteran Taiwanese engineer trained in the US who founded TSMC, is not without a thread. On several occasions he has publicly noted that the production costs of his plants located outside Taiwan will double in the future, which will have a direct impact on the price of the chips. This increase in costs is a consequence of the rise in the price of energy, the cost derived from workers’ salaries and the impact that inflation is having on the price of a good part of essential raw materials.
CC Wei has clarified that the increase in manufacturing costs will be assumed by both TSMC and its customers.
CC Wei, the CEO of TSMC, has qualified Morris Chang’s statements by anticipating that the increase in costs derived from the manufacturing of cutting-edge integrated circuits in the company’s plants outside Taiwan will be assumed by both TSMC and its clients: “If my client wants to manufacture in a specific area [fuera de Taiwán] then definitely TSMC and the customer themselves will have to share the increased costs […] “We are already discussing it with our clients.”
The new plants that TSMC is building in Arizona are already well underway, which has presumably allowed company executives to calculate the 20 to 30% cost increase we talked about above. What is not entirely clear is whether the future plants of this company in Germany and Japan They will suffer the same fate. Probably yes because production costs in these two countries are a priori higher than in Taiwan, although it is possible that the price increase is not identical to that expected for the US.
Be that as it may, it is curious that two identical integrated circuits manufactured by the same company using the same integration technology can have a different price depending on the physical location of the plant in which they were produced. We will see what impact the cost strategy that TSMC is going to deploy has on the price of consumer products sooner rather than later.
Image | TSMC
More information | Tom’s Hardware
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