Reports published by Taiwan’s business-orientated media indicate that Apple has yielded to TSMC’s price increase demands for 2023, but as with all unofficial news, take it with a grain of salt. Last week The Economic Daily (UDN) said that it heard several TSMC customers had received notices of the intended price changes but that Apple had indicated it would reject any increases – with Nvidia watching closely for signs that TSMC is willing to negotiate. Today, the same source reports that Apple will pay the requested extra money for TSMC’s services in the coming year.
According to the reports, TSMC intends to up 8-inch wafer output prices by 6% and 12-inch wafers by between 3 and 5%. UDN said that it knows of several sources who confirmed this range of foundry price increases. Apple is a significant customer of TSMC, said to account for approximately 25% of its business. However, this doesn’t appear to have given Cupertino any significant leverage over TSMC, as today’s report says that the foundry would not budge in its price increase demands.
Nvidia has reportedly been watching from the sidelines for signs that TSMC will negotiate. However, with the apparent cave-in of Apple over the price increase demands, it doesn’t give much hope for Nvidia to cut its costs by putting the squeeze on TSMC.
The ‘secret’ of TSMC’s seemingly unassailable bargaining position is its broad customer base. The industry has been slammed with consumer downturns, most notably in demand for consumer semiconductor-reliant consumer products like graphics cards, smartphones, and storage devices. However, some of TSMC’s customers are still riding a strong wave of demand in H2 2022 and looking positive about the coming year. Technology segments highlighted by UDN for their continued buoyant demand include; automotive, data center, and HPC.
Lastly, UDN shares an anecdote about TSMC’s reputation for ‘reasonable’ behavior, which has softened opposition to its requests for price increases in the face of a worldwide recession. Apparently, TSMC only sought ‘modest’ price increases in previous boom periods. Hence, insiders see the current 5% or so increases as reasonable, especially with higher inflation, and raw materials costs swinging up in most regions.