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Taiwan Semiconductor Manufacturing Company (TSMC) has indicated it will increase the cost of chips made outside of Taiwan as the company reacts to pressures on its profitability.
The world’s largest maker of advanced chips for customers like Apple Inc. and Nvidia Corp., has sounded its price warning as government and big tech firms are cognizant of the geopolitical risks of having more than 90% of the world’s chips made in the country. Moves are already underway to spread the production of the most advanced semiconductors to other locations, especially as China claims Taiwan as part of its sovereign territory and is striving to bring it under full control.
TSMC’s chief executive CC Wei made a clear statement on Thursday, during the company’s earnings call for the first quarter.
“If a customer requests to be in a certain geographical area, the customer needs to share the incremental cost.”
“In today’s fragmented globalization environment, cost will be higher for everyone, including TSMC, our customers and our competitors,” he said, adding that discussions with customers had commenced.
TSMC plans for overseas semiconductor production
Global expansion, intense power consumption, and overall production of in-demand cutting-edge technology come with a significant outlay so this development won’t be a shock to many. As the company deviates from its original policy of only making chips in Taiwan, it is reacting to market forces.
TSMC is now preparing to make its chips in Germany, Japan, and the US with fabs being built to house the production but it will mean paying a premium for the product.
Startup and material costs are simply much more expensive than in TSMC’s native environment and this comes at a time when it expects to see a slump in the domestic market.
The flagship Taiwanese company has forecast for profitability to fall this year due to increased power costs at its main base, the damaging impact of the earthquake earlier in April, and a slower 3nm manufacturing process – the most advanced chip technology currently in mass production.
Image credit: TSMC
