Taiwan IC design houses are mulling a move to renegotiate with TSMC on foundry prices for 2023, looking to have the chip manufacturing partner halve its quote hike to 3% for mature processes such as 45 nm and 28nm nodes to ease cost pressure amid sluggish terminal demand, according to industry sources.
TSMC has earlier determined that prices for most of its manufacturing processes will rise by about 6% starting January 2023, despite market concerns about a disappointing second half of 2022 for a number of end markets, the sources said.
With downstream clients likely to stop taking shipments or placing new orders at least throughout 2022, IC design houses have already cut wafer starts with non-Taiwan-based foundry partners and second-tier local foundries to prevent inventory from swelling further amid weak demand, the sources said. But they have refrained from slashing orders with TSMC lest they should lose capacity support from the foundry in the future, the sources said.
But IC design houses still have been unable to avoid further cost increases and profit decreases amid the lingering market headwinds, and the only thing they can do now is to muster up courage to ask TSMC to soften its price hikes for 2023, the sources stressed, adding that they are not asking the foundry to freeze quote rises but only to halve the hikes.
Capacity utilization rates at TSMC's Fab 15A for 28nm chips and Fab 14A for 45nm ones reportedly are now less than 100% and are expected to fall further between the end of 2022 and the first half of 2023, compared to fully loaded production at its other 8-inch fabs for mature processes and 12-inch wafer fabs for advanced process nodes, the sources said. This has provided a good opportunity for IC designers to renegotiate with TSMC on pricing for 45nm and 28nm processes.
But it is highly difficult for IC design houses to have TSMC's agreement to their requests, the resources said, reasoning that the foundry remains firm on its price increases for next year as it wants to offset part of the rapid cost increases in overseas capacity expansions and huge R&D expenses for advanced process technologies.
Despite weakening chip demand for consumer applications, TSMC can easily re-allocate its capacity to better support persistently robust demand for datacenter, automotive and other applications, the sources said.
Article translated by Willis Ke
