# 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.
- Title: TSMC Warns of Margin Erosion as Samsung Competes on Price
- Summary: 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…
- Keywords: tsmc, samsung electronics, taylor fab, arizona fab, gross margin, pricing power, foundry market, 4 nanometer, 2 nanometer, 3 nanometer, finance, markets
- Source: BigGo Finance — https://finance.biggo.com/news/68c2f7fb-6aca-4360-8602-8158c1ab0b69
- Author: BigGo Finance
- Published: 2026-10-19T07:55:49+00:00
- Read time: 1 min
- Topics: tsmc, samsung electronics, taylor fab, arizona fab, gross margin, pricing power, foundry market, 4 nanometer, 2 nanometer, 3 nanometer, finance, markets
## 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.
## Key takeaway

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.