The surge in AI demand has led to a comprehensive shortage of advanced capacity at Taiwan Semiconductor, with its N2 and N3 nodes nearly fully booked by Apple and NVIDIA. After Samsung took the lead in July by raising prices for its 4nm and 5nm processes by 10–15%, Taiwan Semiconductor plans to follow suit. Prices for the N3 node have already been increased by 15%, while the N2 and N5 nodes are scheduled for a further 5–10% hike by early 2027 at the latest. Mature process nodes, including N12, N16, and N28, will also see supplementary price increases of up to 10%. This strong pricing power has prompted Wall Street to significantly raise its earnings forecasts and target prices for the company.
Robust demand for AI chips is reshaping the pricing landscape of the global foundry market. Following $Samsung Electronics (005930.KR)$ the initial hike in foundry service prices, market expectations are that the industry leader $Taiwan Semiconductor (TSM.US)$ will follow suit comprehensively, planning to implement price increases of 10% to 15% across all process nodes. This marks the entry of leading chip manufacturers into a new cycle of sustained margin expansion.
Capacity shortages are the direct catalyst driving this round of price hikes. According to reports from TrendForce and Nomura Securities, Taiwan Semiconductor completed a new round of price negotiations with customers in mid-year, implementing price increases of up to 15% for specific 3nm (N3) processes facing supply deficits in the second half of the year. By early 2027 at the latest, Taiwan Semiconductor plans to further raise prices by 5% to 10% for advanced processes such as N2, N3, and N5 on top of these adjustments.
Expectations of price hikes have rapidly transmitted to capital markets, prompting Wall Street institutions to significantly upgrade Taiwan Semiconductor's valuation. Institutions such as Citi, Bank of America, and Macquarie have raised their target prices for Taiwan Semiconductor, with the highest forecast reaching NT$4,200. These institutions generally believe that rigid AI demand and enhanced pricing power will directly bolster the long-term profitability of Taiwan Semiconductor and its related supply chain.
The return of pricing power began with Samsung. As previously reported by Wallstreetcn, citing Reuters, Samsung raised foundry prices for its 4nm and 5nm processes by 10% to 15% in July, while prices for the mature 8nm process also increased by nearly 10%. Influenced by the spillover effect from Taiwan Semiconductor's capacity constraints, Samsung's long-loss-making foundry business has reached a significant turning point.
Amid urgent capacity shortages, Taiwan Semiconductor raises foundry quotes across the board
Taiwan Semiconductor's advanced process capacity is currently fully utilized. Market data shows that its N2 and N3 process chips have been almost entirely booked by Apple and NVIDIA. To meet the demand for the new generation of Nova Lake desktop processors launching in early 2027, competitor Intel, in addition to using its own 18A process, will expand purchases of N2X process chips from Taiwan Semiconductor, further exacerbating the tight capacity situation.
Against the backdrop of insufficient supply for advanced capacity, Taiwan Semiconductor's price hike strategy is spreading to its entire product line. According to market research reports, in addition to significant price increases for the N3 process, mature process chips such as N12, N16, and N28, which have not seen adjustments for three consecutive years, will also see catch-up price increases, with maximum hikes projected at up to 10%. This means that starting from the second half of this year, Taiwan Semiconductor will gradually and comprehensively raise prices for all its foundry chips.
A report by Citi Securities suggests that benefiting from strong procurement of AI chips by global tech giants, Taiwan Semiconductor's advanced process capacity utilization rate will remain high. In particular, rigid demand for N2 and N3 chips will support steady price increases for its foundry services through 2027. It is reported that the starting price per wafer for Taiwan Semiconductor's N2 process has reached as high as $30,000, representing a 10% to 20% premium over the N3 process.
Capital expenditure hits record high; Wall Street significantly upgrades earnings expectations
To widen the technological and scale gap with Samsung and Intel, Taiwan Semiconductor is accelerating capacity expansion.
A report by CLSA indicates that Taiwan Semiconductor's capital expenditure is projected to reach USD 80 billion in 2027 and expand to USD 90 billion in 2028. This year, the company has raised its capital expenditure guidance to a historic high of USD 52–56 billion. In July, it announced an increase in its U.S. investment commitment to USD 265 billion, with plans to construct multiple wafer fabrication plants and advanced packaging facilities in Arizona.
Strong pricing power and capacity expansion have led major foreign investment banks to uniformly express optimism about its profit outlook. Bank of America, Goldman Sachs, and Citi have reached a broad consensus on Taiwan Semiconductor's earnings per share (EPS) for 2026–2028, projecting that EPS will exceed TWD 100 in 2026 and reach TWD 170–200 by 2028. All institutions have assigned ratings of "Buy" or "Outperform," with target prices centered between TWD 3,700 and TWD 3,800.
Optimism in the capital markets has also extended to the supply chain. Although Taiwan Semiconductor's stock price recently dipped to TWD 2,375 due to a pullback in the Philadelphia Semiconductor Index, institutions believe that current levels present a good opportunity to build positions at lower prices, given expectations of consecutive record-high revenues and a comprehensive price adjustment of 10% to 15%.
Meanwhile, Taiwan Semiconductor's expansion plans have driven double-digit revenue growth for supply chain companies in semiconductor equipment, materials, and cleanroom solutions during the first seven months of this year. Industry visibility now extends beyond 2027.
Samsung fires the first shot in price hikes, raising rates for both advanced and mature process nodes simultaneously.
An article by Wallstreetcn stated that, according to Reuters, Samsung Electronics implemented price increases for new orders of certain advanced process foundry services in July, with hikes reaching up to 15%.
Specifically, prices for 4nm (SF4) process chips for customers in mainland China and the United States rose by 10% to 15%. Wafer prices for the 5nm SF5 process also increased by 10% to 15%, while prices for the 8nm process rose by nearly 10%.
From a market structure perspective, Samsung's price increase carries significant signaling implications. According to data from research firm Counterpoint, in the first quarter of 2026, Taiwan Semiconductor held approximately 73% of the global foundry revenue market share, compared to about 7% for Samsung and 5% for SMIC. Samsung's foundry division has recorded continuous losses since 2022 and has long failed to effectively narrow the gap with Taiwan Semiconductor.
The Wallstreetcn article noted that Samsung Foundry's client base is expanding rapidly, further strengthening its position to raise prices. Tesla and Apple signed chip manufacturing agreements with Samsung last year. In July this year, Samsung announced a collaboration with Broadcom on AI chip production. Additionally, NVIDIA CEO Jensen Huang stated in March that Samsung would provide foundry services for its new AI inference processors. Google is currently also in negotiations with Samsung regarding chip production using the SF4 process.
Samsung expects advanced processes to account for more than half of its foundry revenue this year, with the share of AI and high-performance computing applications exceeding 30%, up from 15% to 20% at the end of 2025. The SF4 production line at Samsung's Pyeongtaek plant in South Korea has been operating at full capacity since late last year, producing logic chips for clients such as Qualcomm, as well as base dies for Samsung's own multi-layer High Bandwidth Memory (HBM) chips.