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[News] TSMC Reports Highest Electricity Price in Taiwan, Affecting Next Year’s Gross Margin
During the earnings call on October 17th, TSMC revealed that electricity prices for its factories in Taiwan have doubled in recent years, making them the highest among all its global operations.
According to a report from CNA, TSMC stated that factors influencing next year’s gross margin include electricity costs, exchange rates, and the adoption of advanced nodes. The increase of overseas factories’s capacity might also reduce the gross margin by approximately 2 to 3 percentage points.
According to the report, TSMC’s Chief Financial Officer Wendell Huang has pointed out that the rise in electricity prices in Taiwan is one of the important factors affecting TSMC’s gross profit margin. He expects that rising electricity costs, coupled with other expense factors, will affect gross profit margin performance next year by at least 1%.
Huang said that now the electricity price of TSMC’s factories in Taiwan is the highest among all its operating factories in the world, and the electricity price adjustments in October this year has increased TSMC’s electricity charges by 14%.
According to the report, Huang mentioned that in the past few years, the electricty price for TSMC in Taiwan has doubled. In 2022, the electricity price increased by 15% and in 2023 by 17%. In the first half of this year, there was an increase of 25%.
Recently, TSMC’s increasing power consumption has sparked concerns regarding Taiwan’s energy supply. Citing a report by S&P, a report by Wccftech highlights that compared with 2023, the foundry giant’s electricity consumption could nearly triple by 2030, accounting for about 24% of the island’s total electricity usage.
According to Wccftech, TSMC’s shift to 3nm chip production is driving S&P’s forecasts for the company’s soaring electricity consumption. On the other hand, the report also cites data from Taiwan’s state-owned electricity provider, TaiPower, to show that the island’s electricity reserve margin continues to fall short of the government’s 15% target.
Other factors that might influence the gross margin next year are also discussed in the earnings call. According to the report, the shift towards more advanced nodes, such as 3nm and 2nm, has significantly impacted the gross margin.
TSMC has transitioned some of its capacity from 5nm to 3nm chip production to meet the strong demand for 3nm chips. The company also plans to begin 2nm production in 2026. All of these factors contribute to increased costs and affect the gross margin.
Huang also noted that fluctuations in the exchange rate could affect the gross margin next year. According to the report, industry insiders predict a roughly 1% change in the USD to NTD exchange rate, which could impact TSMC’s gross margin by approximately 0.4 percentage points.
In addition, during the earnings call, institutional investors expressed concerns about antitrust issues, according to the report. Chairman and CEO C.C. Wei highlighted that TSMC not only manufactures wafers but also engages in advanced packaging, testing, and mask production. Revenue from these additional sectors contributes approximately 10% to the overall revenue.
According to the report, Wei stated that when including advanced packaging, testing, mask production, and other projects, TSMC holds a market share of approximately 30% in the semiconductor wafer industry. He emphasized that the company does not have a monopoly and therefore does not face antitrust issues.
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(Photo credit: TSMC)
