TSMC is the biggest contract chipmaking foundry and while Samsung Electronics has tried catching up, TSMC's lead remains unassailable. Samsung has relied on an aggressive pricing strategy to win customers and that has brought a measure of success to the company.
Samsung also benefits from the overflow of orders since TSMC's order books are typically filled for a couple of years down the line, leaving customers with no option but to go with Samsung's foundry. Now as TSMC considers charging customers more for chips there's a chance that Samsung could get even more clients.
TSMC's order book is filled for two years
TSMC Chairman C.C. Wei recently highlighted the rising cost of doing business for the company, saying that there was a need to increase prices. NVIDIA CEO Jensen Huang also echoed a similar view, saying that the manufacturing prices were too low.
Market analysts now believe that TSMC will increase prices in the second half of this year. The company's 3nm order book is reportedly full until 2026 even as it hikes prices by up to 5%. Chip-on-wafer-on-substrate (CoWoS) are also expected to rise by up to 20%.
This would provide many customers the incentive to consider a switch to Samsung, provided that the Korean giant maintains its aggressive pricing strategy, as Samsung remains the only alternative to TSMC.
Many customers won't have a choice but to go with Samsung, either, since TSMC's factory utilization rate is expected to hit 100%, meaning that there would be no excess production capacity that they would be able to book.
This would work out well for Samsung which has continued to focus on increasing revenues from its chip manufacturing division, particularly in the face of headwinds in the lucrative memory chip business.
