Tuesday saw TSMC hold its shareholder meeting, where the newly appointed chairman, Mark Liu, hinted at considering raising the prices for the company’s artificial intelligence chip manufacturing services. He also mentioned discussing this issue with NVIDIA’s founder and CEO, Jensen Huang.
In response to related questions, Jensen Huang openly acknowledged the value of TSMC’s chip manufacturing services:
“TSMC’s wafer prices are indeed too low, and the company’s contribution to the world and the technology industry is underestimated by its financial performance.”
Based on this, Morgan Stanley’s analyst team, led by Charlie Chan, released a research report on June 5, predicting that TSMC may raise wafer prices by 5% in 2025 to maintain its gross margin at 53% or higher. They also suggested that if NVIDIA accepts the price hike, other key AI customers may follow suit.
Currently, TSMC is the sole production partner for NVIDIA’s most advanced AI training chips, including the latest Blackwell series.
The report suggests that to achieve the target gross margin of 53% or higher, TSMC may have to increase prices to offset the high costs of U.S. wafer fabs.
Based on historical price increases of 10% in 2022 and 5% in 2023, the report considers a 5% increase in 2025 as “likely.”
The report notes that NVIDIA is a major customer of TSMC, with its orders accounting for 10% of TSMC’s revenue this year. If NVIDIA agrees to TSMC’s price hike plan, it indicates recognition of TSMC’s reliability, and other downstream chip manufacturers may follow suit in September or October this year.
Therefore, Morgan Stanley predicts that within the next two years, the average selling price of 3nm wafers will increase by 11%, 4nm wafers by 3%, and the price of CoWoS packaging will increase by 20%.
Based on this, Morgan Stanley forecasts that TSMC’s gross margin will return to 53-54% by 2025.
By 2025, AI revenue contribution to exceed 20%
Meanwhile, demand for AI chips remains strong. The report predicts that TSMC will more than double its CoWoS capacity in 2024, and some packaging processes may even be outsourced to other backend foundries, with customer demand potentially difficult to meet.
In this trend, Morgan Stanley believes that TSMC will be a “long-term winner” in the AI trend—whether it’s GPUs or ASICs, cloud computing, or edge AI, most will require TSMC’s cutting-edge manufacturing services, giving the company a significant advantage in AI growth.
Morgan Stanley forecasts that by 2024, the contribution of AI cloud business chips (excluding CPUs) to TSMC’s revenue will be 11%, increasing to 20% by 2027. If we include a broader range of AI chip manufacturing businesses, the contribution of AI business to TSMC’s revenue will exceed 20% by 2025.
The report also suggests that considering possible price increases, TSMC’s earnings per share forecast for 2026 is raised by 6%, and its target price on the Taiwan Stock Exchange (2330.TW) is raised to NT$980 per share, representing a 9.8% upside from yesterday’s closing price (NT$894).
Since the beginning of this year, TSMC’s stock price on the Taiwan Stock Exchange has risen by 48.23%.
