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TSMC Warns of Margin Erosion as Samsung Competes on Price
TSMC warns 4% gross margin erosion at US plants as Samsung's Taylor Fab hinges on pricing power.
In brief
TSMC warns 4% gross margin erosion at US plants as Samsung's Taylor Fab hinges on pricing power. TSMC's gross margin could drop 4 percentage points this year due to US production expansion, while Samsung must compete on price to win orders at its Taylor plant. Originally reported by BigGo Finance.
TSMC Warns of Margin Erosion
TSMC has officially warned that its gross margin could be diluted by about 2 percentage points this year and by as much as 3-4 percentage points over the coming years as it expands overseas production.
Arizona Fab Costs 90% Higher
At its Arizona fab, the production cost per 4-nanometer wafer is $12,270, roughly 90% higher than the $6,471 at its Tainan plant in Taiwan.
Samsung's Market Share Challenge
Samsung Electronics has only a 5.9% market share in the foundry market, far below TSMC's 72.5% share.
TSMC's Pricing Strategy
TSMC can pass on the cost burden through regionally differentiated pricing to major customers like Nvidia and Apple.
Samsung's Taylor Fab Timeline
Samsung plans to begin 2-nanometer mass production at Taylor Fab 1 in 2.027 and start Taylor Fab 2 in 2030.
Cost Burden at Taylor Fab
Taylor Fab 1's $11 billion equipment investment and $2.4 billion annual operating costs strain profitability before full-scale production.
Tesla Demands Price Cuts
Tesla has requested that Samsung Electronics lower semiconductor supply prices for its next-generation AI chips.
TSMC's 3-Nanometer Expansion
TSMC plans to build a 3-nanometer plant in Tainan, Taiwan, starting mass production in 2028.
Samsung's Profitability Challenge
Samsung must compete on price to win orders while absorbing US production costs to turn its foundry business profitable.
Structural Cost Gap
A structural cost gap of 27-30% is expected to remain between US and Taiwan production for advanced chips.
Pricing Power Critical for Samsung
Samsung's ability to negotiate pricing is emerging as the key to turning its foundry business profitable amid high US costs.
The headline
TSMC's gross margin could drop 4 percentage points this year due to US production expansion, while Samsung must compete on price to win orders at its Taylor plant.
