At the beginning of the new year, there was news of price cuts in the global chip foundry industry, Samsung and Taiwan Union Power were the first to cut prices, and TSMC, the largest chip foundry, was still holding the pipa and half-covering its face - not publicly reducing prices, but giving chip companies preferential discounts, showing that the global chip oversupply is quite serious.
The problem of chip overcapacity has actually appeared in the second half of 2022, due to China's large-scale substitution of domestic chips, China's imported chips have been decreasing for several consecutive years, and the global chip market is so large, especially the scale of mobile phones, PCs and other industries with more demand for chips has already shrunk a lot from the peak, and the mobile phone industry has shrunk from 1.5 billion units in the early years to 1.2 billion units in 2022, so that the chip overload has become a problem.
In the face of chip overcapacity, chip companies are the first to react, and Texas Instruments, the leading analog chip in the United States, will cut the price by ninety percent in 2022, reducing the price of a classic chip from 70 yuan to 1 yuan, hoping to clear the inventory at a low price; memory chips are also an industry with serious price drops, and the price will be cut in half from mid-2022 to 2023.
At the end of 2022, Samsung, Tailian, etc. will take the lead in cutting prices by one to two percent to grab limited orders, these are mature processes, and advanced process processes are only available to Samsung and TSMC, and the competition in advanced process is not too fierce.
TSMC also strongly stated at that time that it would not reduce prices even if it reduced chip production capacity, and it did the same in action, closing a number of EUV lithography machines at the end of 2022 to reduce chip production capacity, so as to ensure chip foundry prices to ensure profits, which is also the reason why TSMC still achieved performance growth in the first half of 2023.
However, the change in the situation is obviously beyond market expectations, due to the decrease in orders from chip companies, chip companies have regained the right to speak, especially Apple, these large chip companies - Apple alone contributed 26% of TSMC's revenue, Apple prompted TSMC to revise the chip charging rules last year, from charging according to standard wafers to charging according to available wafers, but other chip companies have not been treated like this.
After all, TSMC's change of attitude towards Apple has released a signal, and since the second half of 2023, the global chip oversupply has further deteriorated, which can be seen from the fact that Samsung and Taiwan UMC have further reduced prices by 5%-15% shortly after the beginning of 2024, and chip orders are further decreasing.
For chip foundry companies, chip manufacturing is different from other industries, this is a highly automated production line, and it is necessary to ensure that the production line runs 24 hours a day, which means that even if there are no orders, the chip manufacturing production line still has to continue to operate.
For TSMC, the attractiveness of the advanced process is declining, its 3nm process is accused of limited technology improvement and too much cost increase, and the yield rate is as low as 55%, which has led to Qualcomm, MediaTek and other companies deciding to continue to use the 4nm process in addition to Apple, which has deep pockets, and the chip foundry industry has now attracted Intel, a strong company, Intel will rank among the top ten global chip foundries for the first time in 2023, and the competition in the chip foundry industry will be further intensified.
Now in the face of many competitors competing for orders, TSMC can only further provide discounts to attract chip orders, just as the above-mentioned TSMC did not cut the price in the official for the sake of good face, but quietly reached an agreement with chip companies to give preferential discounts;