The core driver behind the price increase lies in the fundamental shift in demand structure in the AI era—tech giants such as NVIDIA, AMD, Google, and AWS are accelerating their adoption of 3-nanometer technology, while surging demand for in-house ASICs continues to keep manufacturing capacity fully utilized. On the supply side, rising overseas fab construction costs and the yield ramp-up challenges of 2-nanometer production further reinforce the rationale for price hikes.
$Taiwan Semiconductor (TSM.US)$ Pricing power for advanced process nodes continues to strengthen, with the supply chain signaling another round of price hikes.
On May 27, according to Taiwan’s Commercial Times, supply chain sources reported that Taiwan Semiconductor plans to raise prices for its 3-nanometer process again in the second half of the year, with increases of up to 15%, and potentially another 5% to 10% next year. This pricing adjustment is not driven by demand from a single customer but rather reflects a fundamental shift in the supply-demand dynamics of advanced nodes in the AI era.
On the demand side, cloud computing giants—including NVIDIA, AMD, Google, and AWS—are rapidly adopting 3-nanometer technology, with surging orders for AI accelerators, custom ASICs, and flagship smartphone chips keeping 3-nanometer capacity fully utilized. On the supply side, rising costs associated with overseas fab construction, increased depreciation burdens, and yield ramp-up challenges during the initial production phase of the 2-nanometer node all support this price increase. The market expects this move will help Taiwan Semiconductor sustain its gross margin performance.
Meanwhile, MSCI’s latest semi-annual index review took effect after market close on May 29, with Taiwan Semiconductor receiving the largest upward weight adjustment among constituents in the MSCI Taiwan Index—its weight increased by 0.56 percentage points to 58.33%, likely attracting continued inflows of passive investment funds. C. C. Wei, Chairman of Taiwan Semiconductor, is also scheduled to address AI demand, advanced process nodes, and global expansion strategies at the company’s shareholder meeting on June 4, drawing significant market attention.
Structural Shift in Supply-Demand Dynamics Drives Price Hikes
The core rationale behind this round of 3-nanometer price increases lies in a fundamental expansion of demand sources.
According to the report, ASIC vendors noted that smartphone SoCs were previously the primary driver of 3-nanometer demand, resulting in a relatively narrow demand structure. However, with the full-scale rollout of AI server platform upgrades, NVIDIA, AMD, Google, AWS, and multiple cloud service providers are accelerating adoption of the 3-nanometer node, rapidly intensifying wafer orders. In particular, major cloud providers have been actively developing in-house ASICs in recent years to reduce reliance on general-purpose GPUs, further broadening the demand base for 3-nanometer technology and keeping advanced-node capacity in tight supply.
Supply chain sources revealed that Fab 18, Taiwan Semiconductor’s main 3-nanometer production facility, continues to operate at high utilization rates, with no significant easing in customer waitlists. Foundry data shows that 3-nanometer monthly capacity was approximately 130,000 wafers at the beginning of this year and has since gradually risen to between 160,000 and 175,000 wafers in Q2. Despite ongoing capacity expansions, the pace of AI-driven demand growth continues to outstrip market expectations, leaving the near-term capacity gap difficult to close.
3-Nanometer Emerges as Optimal Node for AI Mass Production
Within the competitive landscape of advanced semiconductor nodes, the 3-nanometer process has now firmly established itself as the core node for mass production of AI chips.
According to reports, compared with the 2-nanometer process—which remains in the early stages of yield ramp-up—the 3-nanometer process offers AI customers greater advantages in terms of production stability and cost control, making it the most mature and reliable advanced node option currently available.
Market analysis suggests that as the global AI computing race intensifies, competition in advanced semiconductor processes has evolved beyond mere technological iteration into a comprehensive contest encompassing production capacity scale, yield performance, and supply chain integration capabilities—areas in which Taiwan Semiconductor holds a significant lead across all dimensions.
Furthermore, rising costs associated with overseas manufacturing, increased depreciation burdens from advanced nodes, and upfront yield-related investments required for initial 2-nanometer production all provide reasonable justification for Taiwan Semiconductor’s decision to raise 3-nanometer pricing, helping to stabilize gross margin performance during its expansion cycle.
MSCI weight increase coupled with shareholder meeting catalyst
On the capital markets front, multiple factors are concurrently providing short-term support for Taiwan Semiconductor.
The latest MSCI semi-annual index review took effect after market close on May 29. In this adjustment, Taiwan Semiconductor saw the largest single upward revision in weighting within the MSCI Taiwan Index, with its weight increased by 0.56 percentage points to reach 58.33% post-adjustment.
Foreign investors currently hold a 70.35% stake in Taiwan Semiconductor. Market participants interpret this high foreign ownership as indicating that, with continued inflows of passive funds, Taiwan Semiconductor is poised to benefit from a new wave of capital momentum.
Meanwhile, Morgan Stanley has also invited Taiwan Semiconductor to participate in an investor briefing. At the June 4 shareholder meeting, Chairman C. C. Wei is expected to deliver a comprehensive overview of AI demand outlook, advanced process technology roadmap, and overseas capacity expansion plans, keeping the market highly attentive to Taiwan Semiconductor’s future direction.