To The Moon

$Taiwan Semiconductor Manufacturing(TSM)$According to the breaking news of a mobile phone chip experts on Weibo, Apple officially rejected the price increase request of TSMC in 2023.

TSMC is definitely caught in a dilemma. Chip foundry costs have risen significantly in recent years, and TSMC had to raise chip prices to maintain a certain margin. But Apple is a major customer that TSMC cannot afford to offend. In fact, TSMC has already given Apple special treatment: Apple’s A-series processor rose by only 3% compared to TSMC’s announced chip foundry price hike of 10-20%. With Samsung’s catch up on its 3nm node breakthrough, TSMC risked Apple shifting orders to Samsung foundries instead.

TSMC’s utilisation rate at its chip fabs are also facing increasing pressure. Due to order cuts with MediaTek, Qualcomm, Nvidia and AMD, TSMC’s N7 and N6 utilization rate is likely to drop to around 90% in 4Q22, down from a fully-loaded level. For N4 and N5, TSMC’s orders are largely intact, so utilization rate will follow seasonality in 4Q22F. For 2023F, given ASIC order cuts from major customers, there could be more increased downside for advanced node utilization rate as well. TSMC’s 1Q23F overall utilization rate could drop to trough at 80%.

Therefore, in the case of Apple, TSMC may choose to negotiate further with Apple, but the possibility of Apple backing down is very small. In the end, TSMC is likely to compromise to survive in this semiconductors downcycle.

@Daily_Discussion@TigerStars