Taiwan Semiconductor Manufacturing Company (TSMC), the world's largest semiconductor foundry, recently announced that it will cut its 6/7nm process technology by 10% from January 1, 2025.
According to TSMC, the price reduction decision is mainly based on the actual situation of the current 6/7nm process technology capacity utilization rate and changes in market demand. At present, the capacity utilization rate of TSMC's 6/7nm node is only about 60%, and the relatively low capacity utilization rate has prompted the company to consider price reductions to stimulate market demand and improve capacity utilization. In addition, with the continuous progress of semiconductor technology and the intensification of market competition, customers' demand for process technology is also changing, and some customers may have begun to turn to more advanced process technologies, such as 3/5nm, which also has a certain impact on the market demand for 6/7nm process.
For TSMC's customers, this price cut is undoubtedly good news. The price reduction will directly reduce their production costs and enhance the market competitiveness of their products. At the same time, this will also prompt more companies to consider adopting TSMC's 6/7nm process technology to further promote the application and popularization of this technology.
However, TSMC's price reduction decision could also have a profound impact on the competitive landscape of the semiconductor manufacturing industry. On the one hand, price cuts may trigger other semiconductor manufacturers to follow suit and intensify market competition. In order to maintain market share and competitiveness, these companies may need to adopt similar price reduction strategies, resulting in a squeeze on the profit level of the entire industry. On the other hand, the price reduction may also prompt TSMC to further adjust its product line and technology strategy in response to market changes. For example, TSMC is likely to increase its investment in more advanced process technologies to meet market demand and maintain its leading position in the industry.
Figure: TSMC's 6/7nm process will be reduced by 10% from the beginning of 2025
Despite the price adjustment, according to the Morgan Stanley (Morgan Stanley) report, TSMC's gross profit margin is expected to increase due to agreements with customers and supply chain management capabilities, which is expected to reach 55.1% in 2025 and further increase to 60% in 2026.
It is worth noting that although TSMC has adopted a price reduction strategy on the 6/7nm process, it is still in short supply for more advanced 3/5nm process technology. According to forecasts, TSMC plans to increase the price of 3/5nm process technology by 5% to 10% in 2025 to reflect its high demand and technology leadership. This decision shows that TSMC remains confident in maintaining its leadership position in advanced process technology.
To sum up, TSMC's decision to reduce the price of 6/7nm process by 10% in early 2025 will have a profound impact on the semiconductor manufacturing industry. This decision will not only reduce the customer's production cost and enhance market competitiveness, but also may trigger changes in the competitive landscape within the industry. With the continuous advancement of technology and changes in market demand, semiconductor manufacturers need to constantly adjust their product and pricing strategies to adapt to market changes and remain competitive. As an industry leader, TSMC's decisions will lead the development direction of the entire industry.
