How TSMC is holding its own despite weak chip demand
You might think that the world's leading foundry, Taiwan's TSMC, is getting spanked financially by a bleak chip industry that has seen demand for wafers decline. For example, TSMC reported that it shipped 2.96 billion 12-inch wafers during the fourth quarter of 2023. That was down 20.1% from the previous year's deliveries of 3.7 billion 12-inch wafers. Despite this sharp decline, TSMC's Q4 revenues for 2023 came in at $19.62 billion which was down only 1.5% from the $19.93 billion reported during the same quarter in 2022.
So how did TSMC manage to keep its revenue decline in check? It hiked the price of its 12-inch wafers by 22% in Q4 year-over-year to an average price of $6,611, up from $5,384 in Q4 2022. Some analysts attribute this increase to the start of 3nm production as TSMC's most important clients, like Apple, received the 3nm chips that they ordered. While Apple reportedly got a special deal from TSMC last year, the price of a silicon wafer used for the latest 3nm cutting-edge node is believed to be a stunning $20,000 per wafer.
15% of TSMC's Q4 revenue was from 3nm chips
Of course, the more you move away from the latest cutting-edge process node, the cheaper the price of the wafers. 15% of TSMC's fourth-quarter revenue came from its N3 (3nm process node). TSMC took in $2.943 billion from 3nm, N5 (5nm) technology brought in $6.867 billion, and N7 (7nm) technology yielded $3.3354 billion. TSMC's advanced technology nodes (N3/N5/N7) accounted for 67% of TSMC's total wafer revenue in Q4 2023.
TSMC's wafer prices have been trending higher
Per Tom's Hardware, Stacy Rasgon, a senior analyst of U.S. Semiconductors and Semiconductor Capital Equipment at Bernstein Research, notes that while the total number of chips shipped from 2019 to 2023 has declined, the average selling price (ASP) has risen sharply. In a tweet, Rasgon wrote, "How much has pricing contributed to semiconductor industry growth in recent years? Would you be surprised to learn the answer is 'More than all of it?'"
Eventually, demand for chips will start heading back up, and in combination with increasing wafer prices, TSMC should start reporting strong quarterly numbers.
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