Chip stop signal? TSMC suspends 28nm contract price increase to maintain long-term customer relationship

August 9 news, chip demand continues to be high, wafer manufacturers frequently increase prices, making a lot of money. Now, however, TSMC, the industry leader, has taken the lead in stepping on the brakes. According to the Taiwan Electronic Times today, citing industry sources, TSMC will suspend raising the quotation for the process in the second half of the year to maintain a long-term customer relationship, following a slight increase in the 28nm contract price.

Looking into the reason, this may have something to do with TSMC's production expansion plan. At the end of last month, TSMC planned to raise its target for the 28nm expansion of the Nanjing plant from 40, 000 pieces to 100000 pieces per month, an increase of 1.5 times. Mass production is expected to be completed in the second half of 2022 and 40, 000 pieces per month will be completed in mid-2023-the largest mature production expansion of TSMC in nearly seven years.

TSMC is not alone in attaching importance to 28nm. UMC has previously revealed that capital expenditure will reach $1.5 billion this year, an increase of 50% over last year, mainly for 28nm capacity expansion. So, why 28nm?

TSMC first launched the 28nm process as early as 2011. In TSMC's 2020 revenue structure, 28nm process chips account for 12.67% of the total revenue, second only to 7nm and 16nm, and is the third largest revenue force of TSMC.

This process has the advantages of high performance, low power consumption and low cost, and can achieve the highest performance-to-price ratio between 16/14/12nm and 40nm processes. According to IBS data, the cost of 28nm process is 62.9 million US dollars. When it comes to 7nm and 5nm, the cost increases rapidly, and 5nm directly increases to 476 million US dollars.

In addition, 28nm has a wide range of applications. in the current "lack of core tide" sweeping the world, the extremely tight power management chip (PMIC), display driver chip (DDI) and MCU are all inseparable from 28nm, and most of the automotive chips are concentrated in this process.

Under the condition that supply falls short of demand, in addition to the above-mentioned TSMC, SMIC and UMC have also made early plans to expand production of 28nm to cover downstream demand. However, in the short term, it will take time to release capacity, and in the face of surging orders, manufacturers have chosen to raise prices one after another. TSMC has adjusted prices for process orders above 16nm since August, and the prices of the agreed orders will remain unchanged, and some of the increased orders will be adjusted by about 10% Mueller 15%. On July 1, UMC also raised its 12-inch 28nm quotation by 20% to $1800.

SMIC pointed out at its second-quarter earnings presentation on Friday that supply outstripped demand at least until the first half of 2022 and prices are expected to continue to rise in the second half of this year. In addition, a number of analysts in the industry also believe that multi-industry demand resonance, this year's out-of-stock price situation will not stop.

From this point of view, the leading TSMC temporarily stopped the pace of price increases, what is the impact? It may be too early to draw conclusions.