"First long-term price increase action since the AI era"! Report: Taiwan Semiconductor starts "4 consecutive years of price increases," advanced processes rise by about 3%-10%

Taiwan Semiconductor Manufacturing Company (TSMC) will continue to raise prices for advanced processes (below 7nm) next year, with an expected increase of 3% to 10%. This marks the fourth consecutive year that the world's largest foundry has raised prices. On Monday, media reports cited industry insiders stating that due to rising production costs and ongoing supply shortages, the company has initiated annual price negotiations with clients, anticipating a 3% to 10% increase in advanced processes by 2026. Sources revealed that TSMC has notified clients that starting in September, it will implement a four-year price increase plan for advanced processes below 5nm, with the increase varying based on individual client procurement levels and cooperation status. The price for the highly sought-after 3nm process is expected to rise by at least a single-digit percentage. The industry describes this as the "first long-term price increase action since the AI era." Analysts believe that TSMC's rare initiation of four consecutive years of price increases aligns with MediaTek's mention during its earnings call that it "will reflect cost adjustments in chip prices," which is expected to trigger the next wave of chip price increases. Market research firms indicate that with global inflation prevailing, coupled with TSMC's overseas factory construction and rising production costs, to maintain high gross margins, TSMC's prices for processes below 5nm are expected to rise by about 5-10% starting in 2026. Capacity Shortages Drive Continuous Price Adjustments Since 2023, TSMC has resumed its routine annual price adjustments, ending the price freeze period during the pandemic. In 2020 and 2021, the company only canceled the sales discounts at the beginning of the year but did not implement a comprehensive price increase, mainly considering the long-term cooperative relationship with its clients. The price increase in 2023 mainly reflects factors such as supply shortages, inflation, and rising production costs, but the increase is only in the single-digit percentage range, which is moderate compared to peers and the company's own performance. According to research institutions and analysts, although the price increases for individual advanced processes will vary in 2026, the overall increase is expected to outperform this year. Chip designers point out that TSMC's price adjustment may gradually reduce the capacity of mature processes above 7nm, with AI, servers, and high-performance computing (HPC) applications becoming the main beneficiaries. Industry insiders indicate that TSMC will comprehensively consider factors such as client procurement scale and cooperation depth to determine specific price increases, ensuring that costs are reflected while maintaining stable client relationships. Advanced Processes Become Major Revenue Growth Driver Advanced processes have become the main growth driver for TSMC. The 5nm and 3nm family processes accounted for 60% of revenue in the second quarter of this year, maintaining this ratio in the third quarter, with 3nm accounting for 23% and 5nm for 37%. TSMC has repeatedly emphasized that the company closely collaborates with clients to plan capacity and invests in advanced and special process technologies to support client needs, while obtaining appropriate compensation under client trust. Currently, advanced processes are in high demand due to AI applications. Analysts believe that as demand related to AI grows, it will drive TSMC's revenue and profit to continue increasing. Foreign investors have previously raised the company's mid-to-long-term revenue forecast for AI applications, originally expecting that by 2028, AI applications would account for 35% of total revenue, which is now expected to be achieved earlier this year or next year. TrendForce predicts that foundries will benefit from AI-driven demand for power management chips and have planned to comprehensively raise foundry prices by 2026. Although the specific increase is still subject to negotiation, the market's price increase atmosphere has already formed TSMC's leading position in advanced manufacturing processes and the tight capacity situation provide support for its continuous price adjustments