On October 17, Taiwan Semiconductor Manufacturing Company (TSM) released its third-quarter financial report. According to the financial report, TSMC's U.S. stock price rose 9.79% to $205.84 per share, hitting a record high; The total market capitalization exceeded $1 trillion, reaching $1.068 trillion. According to statistics, this is the first company with a market value of more than one trillion US dollars in Chinese concept stocks, and the first Asian technology company with a market value of more than one trillion US dollars.

Since the second quarter, the global chip industry has entered a period of slow recovery, with TSMC leading the way with a high growth rate of 40.1% year-on-year in revenue, and 3nm, which officially began to take orders in the second half of last year, accounted for 15% of the total wafer revenue. According to the industry, TSMC's 3nm capacity utilization rate has reached 100%, and the supply is seriously in short supply, and the future does not rule out the conversion of 5nm production lines to 3nm to fill the supply.

AI chip companies join the battle for new 3nm nodes

With the rapid development of artificial intelligence technology, AI chips have gradually emerged in this field, and even become a new "leader". Today, many AI chip companies have almost joined the race for TSMC's advanced 3-nanometer (3nm) process technology.

3nm is currently the most advanced mass production process node. In 2022, TSMC led the world in successfully commercializing 3nm (N3) process technology. The N3 process, a new generation of technology after 5nm (N5), not only marks a quantum leap in process, but also heralds a major breakthrough in performance and energy efficiency. On this basis, TSMC continues to launch N3E and N3P process versions with better performance, lower energy consumption and higher integration.

To meet the diverse technology needs of customers, TSMC also offers a broad portfolio of technologies, including the N3X process designed for high-performance computing, and the N3AE solution that helps automotive customers adopt state-of-the-art process technologies in advance.

At present, TSMC's list of 3nm projects includes Apple's A18 processor and M4 chip, A19 chip for iPhone, and Qualcomm's upcoming Snapdragon 8 Gen4 chip, Intel's Lunar Lake & Arrow Lake CPU, AMD's Zen 5 CPUs, and NVIDIA's next-generation Rubin with HBM4 memory R100 AI GPU。 In addition, there is MediaTek's Dimensity, which is designed specifically for the automotive market C-X1 chip. These products represent the cutting edge of technology in their respective fields.

TSMC will charge a higher price for its cutting-edge 3nm chips

As more customers adopt 3nm process technology, this process node is expected to account for a significant share of TSMC's revenue. According to ICSmart.cn reports, TSMC's N3 series nodes, including N3B and N3E, will contribute more than 20% of total revenue in 2024, while the 3nm process is expected to generate more than 30% of TSMC's revenue by 2025.

Given the strong demand in the field of artificial intelligence, coupled with orders for consumer electronics products from integrated circuit design companies such as Apple and Qualcomm, TSMC's production capacity is still tight.

In this market environment where supply exceeds demand, rising prices have become an inevitable trend. According to sources, TSMC plans to increase the price of advanced processes such as 3nm and 5nm by 8% to ensure long-term stable profit margins.

Prior to this, the Electronic Times (DigiTimes) reported that TSMC will charge higher fees for the most cutting-edge 3nm chips, and the unit price may exceed the $20,000 mark. This means that the cost of the next generation of CPUs and GPUs will be higher. As production costs rise significantly, chipmakers are likely to pass on these costs to downstream customers and end consumers. It is understood that Qualcomm's previous generation Snapdragon 8 The Gen3 processor sells for around $200, while the new generation Snapdragon 8 The Gen4 processor could cost more than $250, which will further push up the price of the new flagship smartphone.

Customers have accepted the idea of TSMC raising prices

Morgan Stanley analyst Charlie In his research note, Chan noted: "TSMC's 'hunger marketing' strategy seems to be paying off. Our latest supply chain survey shows that TSMC is conveying a message that the supply of advanced process foundries is likely to tighten in 2025, and customers may struggle to obtain sufficient capacity quotas if they do not accept TSMC's offer. ”

TSMC's average selling price of 3nm chips is expected to increase by 4% by 2025, while the average selling price of 4nm and 5nm chips will increase by 11%. In contrast, the mature process node (16nm and above) has relatively sufficient capacity and therefore does not increase in price.

Given TSMC's strong performance in advanced process technology and revenue, its gross margin has become one of the key areas of market attention. According to the report of Dolphin Investment Research, as the mass production of the 3nm process continues to promote the increase in the average price of the company's products, TSMC's gross profit margin will also increase significantly. According to the company's forecast for a gross profit margin of 57%-59% in the coming quarter, it can be seen that TSMC's gross profit margin has come out of the trough from this quarter and stabilized at about 58%.

Although demand in the mobile phone and PC end markets is still in a moderate recovery stage, TrendForce believes that the revenue growth rate of the foundry industry is expected to return to 20% in 2025, supported by the continuous promotion of artificial intelligence and the bottoming out of the inventory of various application parts.