The recent Computex 2024 exhibition, closing today, has seen big technology companies make unexpected statements. Most notably, Nvidia’s founder has expressed approval of the proposal put forth by C.C. Wei, chairman of TSMC’s board of directors, to raise chip manufacturing prices.
Nvidia’s explosive revenue growth, prompted by the AI systems boom, has led not only to increased capitalization but also an increase in the personal wealth of founder, Jensen Huang. Newly appointed TSMC chairman, C.C. Wei, reportedly lamented to the Nvidia head about the high costs of his company’s products, while humorously referring to Huang as a ‘man with three trillion’ (Taiwanese dollars, equivalent to $92.6 billion). He suggested the need to ascertain the value and work involved in their products, hinting at a potential price increase for Nvidia.
The cost of Nvidia components, including TSMC’s production involvement, logically leads Wei to contemplate a price hike. Huang paid keen attention to such remarks, and he admitted during the Computex 2024 interaction with reporters that the silicon wafer price from TSMC is indeed too low. He added, “TSMC’s contribution to the global industry and economy is not adequately reflected in its financial metrics”.
Morgan Stanley analysts point out that Nvidia will generate about 10% of TSMC’s total revenue this year, making it one of the major clients. If Nvidia accepts TSMC’s raised service prices, other clients would inevitably follow suit. Nvidia’s representatives did not comment on the timeline or extent of this price increase, but Morgan Stanley experts predict a 5% increase from next year.
This isn’t the most significant price hike in TSMC’s recent history. Though the company doesn’t officially confirm such information, it reportedly raised its service prices by 10% in 2022 and 5% last year. Customers looking for advanced lithography-produced complex chips have limited alternatives, although Intel, Rapidus, and possibly Samsung Electronics are expected to challenge TSMC in the coming years.
