Just half a year ago, TSMC's advanced process capacity was still in short supply. However, just half a year later, TSMC had no customers in 3nm, and overcapacity of 5nm and 7nm, and had to shut down some EUV lithography machines. The market value was also halved, from US$700 billion at its peak to more than US$350 billion today. TSMC's winter seems to be coming.
Since 2020, the global chip supply has been insufficient, among which automotive chips are the first to show a serious shortage of supply. For this reason, automotive chip companies have actively proposed a price increase of 20% on the condition that TSMC is required to allocate more chip production capacity to automotive chips, thus opening the prelude to TSMC's price increase.
Since 2021, TSMC has sent price increases to chip design companies at least twice. Since the global chip production capacity was still tight at that time, most chip design companies could only agree with TSMC's price increase requirements. Therefore, TSMC's performance has also set record highs continuously, and its net profit margin has risen to an unprecedented 40%. Note that the net profit margin is not gross profit.
However, since this year, global chips have rapidly shifted from insufficient supply to oversupply, and many chip companies have reported high inventory. As TSMC's largest source of revenue, the US chip - US chips contributed nearly 70% of its revenue to TSMC, and US chips are not having a good life. NVIDIA, one of the leading American chips, released its second-quarter results, showing that its net profit plummeted by more than 70%.
As American chips are hard, they have asked TSMC to lower the price of chip foundry. After all, TSMC has continuously raised prices when chip production capacity is insufficient, and the price is too high. TSMC, which has been enjoying more than two years of profit, naturally disagreed, and even TSMC has asked for price increases, and the game between the two sides began.
TSMC is now facing an impact. 3nm, which has repeatedly delayed mass production, has finally completed research and development in the near future. It was originally intended to mass production, but the two originally scheduled customers, Intel and Apple , did not place an order. Intel said that its GPU chip will be delayed for one year and gave up TSMC's 3nm process. Apple failed to catch up with the mass production time of the A16 processor because TSMC's 3nm process was too late, so Apple's A16 processor finally chose the N4 process.
TSMC originally hoped that Apple's M3 processor could use a 3nm process. However, industry rumors now point out that Apple dislikes TSMC's 3nm process performance parameters that did not meet expectations and were too expensive. The M3 processor has not been determined to use a 3nm process, which prompted TSMC to improve the 3nm process to N3E process before adopting it. The huge investment in the research and development of the
3nm process was finally wasted, and the 5nm and 7nm processes that have been mass-produced are now facing the problem of overcapacity. AMD, NVIDIA, Qualcomm , etc. have successively notified TSMC to reduce orders. In desperation, TSMC can only choose to shut down some EUV lithography machines before the end of the year and have reduced power consumption.
In the case of overcapacity, US chips naturally require TSMC to lower the chip foundry price, and even hope to return to the price level before the production capacity is tight; however, TSMC responded hard, not only not lowering prices, but also demanding a price increase next year, so the two sides have been in a deadlock.
Faced with TSMC's tough attitude, American chips are actually not without choice. They also have , Samsung to choose from, and Samsung has always been lowered. Samsung's chip foundry price has always been cheaper than TSMC. In the past two years, Samsung has also actively responded to the US's request to build factories in the United States. In addition to the 5nm factory under construction, Samsung also plans to build a 3nm factory in the United States. In this case, Samsung may receive more orders for American chips.
In fact, American chips have begun to reassign orders. Qualcomm has made a big order for GM earlier, and is expected to purchase US$7.5 billion of chips from GM in the next few years. It can be expected that if TSMC's attitude is still tough, there will be more American chips to orders, such as Samsung and other chip foundry companies. In fact, there is basically no difference between Samsung and TSMC in 7nm and above.
In this case, TSMC's winter may really come, and US chips are gradually shrinking orders. Even if TSMC maintains its current price level, its capacity utilization rate will continue to decline. Revenue declines are inevitable. Perhaps at this time it will think of its second customer, , Huawei .
