A decision by Taiwan Semiconductor Manufacturing Co. (TSMC) to raise the prices of all its products may help boost its gross margin to over 50 percent next year, according to a U.S.-based brokerage.

In a research note released Thursday, the American securities house said the price hikes are expected to boost TSMC’s gross margin — the difference between its revenue and cost of goods sold — to 51.7 percent in 2022.

In July, TSMC posted a 3.8 percent sequential drop in its second-quarter net profit and a 2.4 percentage point decline in its gross margin to 50 percent, citing depreciation of the prices of its advanced processes.

With TSMC’s decision to increase its product prices, however, its gross margin for 2022 is projected to exceed 50 percent, while its earnings per share is likely to be around NT$28 (US$1), higher than the market forecast of NT$22-NT$23 for 2021, according to the American brokerage.

On Wednesday, several integrated circuit designers said TSMC had informed them of a product price hike, effective immediately, amid a global supply shortage. The company, the world’s largest contract chipmaker, declined to comment on the reports.

According to the IC designers, TSMC issued a notice to its clients, informing them that the prices of its chips made on the advanced 7 nanometer and 5nm processes had been increased by 7-9 percent, while the prices of those made on older processes would rise by about 20 percent.

The 5nm process, TSMC’s latest technology, went into mass production in the second quarter of last year.

According to the American brokerage, TSMC’s price hike will offset the deprecation costs resulting from its rollout of more sophisticated processes, boost its gross margin, and strengthen its bottom line.

Another U.S. brokerage gave a similar outlook, saying the price hike is expected to boost TSMC’s revenue by 14 percent next year, after a more than 20 percent increase expected by the company this year.

The price hike was an indication of the chipmaker’s optimism toward the 2022 global semiconductor market, the second U.S. brokerage said, forecasting the company’s EPS for next year at NT$26.

According to industry sources, the price increase is also aimed at helping TSMC raise funds for its planned expansion over the next three years, which is expected to hit about US$100 billion.

Source: Focus Taiwan News Channel