Recent reports from the IC design industry suggest that TSMC, the leading semiconductor foundry, is contemplating a slight price concession for certain mature processes next year, marking a return after three years. Despite its reputation for firm pricing, TSMC’s willingness to make concessions is seen as a response to a decrease in capacity utilization. According to UDN News, this shift may indicate the broader trend of semiconductor foundries facing pricing pressures due to lower capacity utilization.

Known for its stable pricing with minimal fluctuations, TSMC typically offers single-digit percentage annual concessions to clients. The reported concession for specific mature processes is estimated to be around 2%. TSMC, however, declined to comment on these pricing adjustments.

Several IC design companies have confirmed ongoing negotiations with TSMC regarding price concessions for the upcoming year. One disclosed that TSMC’s concession method involves settling after the completion of a full quarter’s production, offsetting the next quarter’s mask costs. This approach allows for low single-digit percentage concessions in the following quarters.

Industry sources suggest that other semiconductor foundries have already taken significant measures, such as direct price reductions on large orders and providing additional free wafer allocations, aiming to boost capacity utilization. Chinese chipmakers initiated price reductions earlier and more aggressively than their Taiwanese counterparts, maintaining TSMC’s relatively firm pricing.

The news of TSMC considering concessions for certain mature processes, while not a direct price reduction, holds indicative significance. It is likely to exert pricing pressure on other industry players with mature processes before the peak season arrives in the latter half of next year.

During the semiconductor shortage in recent years, TSMC initially refrained from raising prices. As a result, its pricing remained relatively lower, even the lowest, compared to other industry players who significantly increased their prices. TSMC reportedly canceled concessions in 2021 and 2022 and initiated a rare price increase at the beginning of 2023, rumored to be in the range of 3% to 6%.

However, with the semiconductor market reversing, the supply chain has been gradually adjusting inventory since the second half of 2022. In the first half of this year, TSMC reportedly introduced an “increase quantity feedback plan,” offering additional mature process wafer allocations for orders reaching a certain quantity.

Although TSMC relies on advanced processes for over 50% of its revenue, with mature processes not being its primary focus, they remain a market consideration.

(Image: TSMC)