Taiwan Semi – Price Increase
On Tuesday we noted that UMC (UMC) had notified customers that it would be instituting another price increase for products developed on its 22nm and 28nm nodes starting in September and November, with another expected in January. This followed a ~13% price increase at UMC in May, again for their 28nm node. According to local press in Taiwan, Taiwan Semiconductor (TSM) has also given notice to customers that it will be raising prices between 10% and 20% for 7nm, 12nm, 28nm, and 40nm nodes in 1Q 2022, although some customers have indicated that TSM has already put those increases into place. TSM increased prices once in 3Q last year and in 2Q this year. The basis for the increases are said to be to cover the higher operating costs of the new fab being built in the US, although it will not be in production until 2024, though more likely to keep margins at current levels or higher.
Rumors have already surfaced that the price increases will affect the retail price of the iPhone 13 series, whose A15 processor is produced on TSM’s 5nm node. Until a real teardown is done it will be difficult to define the effects of a TSM price increase as Apple (AAPL) is expected to add a number of photo and video features that could also add to cost, but the iPhone 12, which was the first to use a 5nm processor, saw an estimated cost increase of over $17. With wafer costs rising this year, even with the higher volumes predicted for the iPhone 13, the BOM will likely see another increase. We note that TSM’s price increases for 5nm and 7nm are expected to be between 7% and 9% while more mature nodes could top out at ~20%.
Rumors have already surfaced that the price increases will affect the retail price of the iPhone 13 series, whose A15 processor is produced on TSM’s 5nm node. Until a real teardown is done it will be difficult to define the effects of a TSM price increase as Apple (AAPL) is expected to add a number of photo and video features that could also add to cost, but the iPhone 12, which was the first to use a 5nm processor, saw an estimated cost increase of over $17. With wafer costs rising this year, even with the higher volumes predicted for the iPhone 13, the BOM will likely see another increase. We note that TSM’s price increases for 5nm and 7nm are expected to be between 7% and 9% while more mature nodes could top out at ~20%.
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