As 2023 draws to a close, Taiwan Semiconductor Manufacturing Co., Ltd. (TSMC) is bracing for rising costs for its cutting-edge semiconductor manufacturing processes. TSMC’s most advanced mass production process is 3nm semiconductor design technology. A latest report cited by Taiwanese media speculates that the cost of 3nm and 2nm nodes will increase significantly in the future.
Today's report is quite interesting as it repeats 2022 wafer cost estimates for 3nm chips sold by Taiwanese chipmakers. The 3-nanometer manufacturing process is currently the most advanced production process in the world, and most of TSMC's latest products are sold to Apple. As early as 2022, a DigiTimes report stated that the cost of TSMC's 3-nanometer wafers was approximately US$20,000. Subsequently, multiple media reports stated that the cost of each wafer may rise to US$25,000 or fall below US$20,000.
Considering that the semiconductor world will change dramatically by the end of 2023, and people want to understand the impact of a potential demand recovery for artificial intelligence processors, cost calculations and the prospect of investment in expensive chip manufacturing facilities should be a consideration for every business planner.
Artificial intelligence has pushed Nvidia Corp.'s valuations to all-time highs, while companies like TSMC have maintained their value despite falling revenue amid a tough macroeconomic environment.
Although the IBS report believes that the 50% price surge of 2nm products will have the greatest impact on Apple, if the current wave of artificial intelligence is fully realized in three years, companies including AMD and Nvidia may also tighten their budgets. In fact, NVIDIA is already selling A.I. products built on TSMC's powerful 5nm node, and if experience is anything to go by, NVIDIA will have the opportunity to produce 3nm (if not more advanced) products by then.
Unconfirmed rumors suggest that NVIDIA's next-generation GPUs will use a 3-nanometer process, which would put Apple entirely on the hook for the high chip costs in the first wave of 2-nanometer production. Because AMD and NVIDIA's processors and GPUs consume more power and are designed for heavy workloads, they are generally not affected by the high wafer costs associated with mass production in the early days of advanced chip technology.
However, supply and demand dynamics in the semiconductor market will likely mean that the price of AI chips will also surge. A $20,000 3-nanometer wafer could become more expensive if demand exceeds installed capacity -- a warning unique to the chip industry. Companies such as TSMC and Samsung have fixed production capacity, and if they are convinced that demand exceeds supply, the initial cost of investing in new equipment is often passed on to customers.
TSMC, in particular, will definitely think twice before over-expanding production after last year's nightmare. Not only has TSMC revised its revenue forecast for 2023 multiple times, but in 2022, the Taiwanese company also has to deal with overly optimistic expectations from customers amid an overall slowdown in its chip business.
China Times quoted a report from Goldman Sachs Group that lowered the capacity utilization rate of TSMC's 3nm and 2nm processes. This hesitant attitude is also obvious. The Goldman Sachs report lowered TSMC’s target stock price and reduced the capacity utilization rate of the 3-nanometer process to 36% in 2023. Perhaps this is why the cost per 3-nanometer wafer has not dropped below $20,000 per wafer for more than a year.