TSMC chip production cost to increase 20%, Apple and others will affect

TSMC is expected to raise its costs for advanced sub-7nm and 16nm process technologies that will result in the rise of the overall manufacturing cost, reports Digitimes. It will largely affect Apple’s upcoming products and other clients of TSMC.

Apple is solely dependent on TSMC (Taiwan Semiconductor Manufacturing Company) for all kinds of processors used in its products and its future products are likely to be affected. In addition to Apple, this will also impact companies such as AMD, Intel, Qualcomm, Nvidia, and others. As per the info, the price hike will come into effect starting from 2022.

The company has already made its customers aware of this price hike and it will mainly have an impact on the price of CPUs, GPUs, SoCs, and controllers. The chipmaker has taken this step in order to improve its gross margins and partly to cover the ongoing chip shortage.

Specifically, TSMC has planned to raise the price of its 7nm process by 10%, whereas the wafers processed using 16nm will face a 20% increase. This new price will be applicable for the orders starting December 2021.

It is yet to be known how much this price increase will have an impact on the cost of actual products such as CPUs and GPUs manufactured by AMD or Apple. The companies affected by this inflation will rather increase the overall product cost or may reduce their profits.

TSMC’s expected revenue increase after the price inflation

The 5nm and 7nm fabrication technologies of TSMC took about 49% of the company’s total revenue in Q2, 2021, which was 13.29 billion. The 10% increase in their price will make around 600 million more profit in the first quarter of 2022.

On the other hand, then 16nm and 28nm processes contributed about 25% of TSMC’s Q2 revenue. If we roughly figure out the increase in profit of TSMC in the first quarter of 2021 after the rise in price, then the revenue may increase by over 1 billion.