Behind TSMC's Record High: Pressuring ASML for Lower Prices, Eyeing Fee Hikes for Nvidia

Source: moomoo

ASML will ship its latest high-NA extreme ultraviolet (EUV) machine to Taiwan Semiconductor Manufacturing this year. However, TSMC has raised concerns about the machine’s price tag.

“I like the high-NA EUV’s capability, but I don’t like the sticker price,” TSMC Senior Vice President Kevin Zhang said in Amsterdam in May. TSMC’s so-called A16 node technology, which is due in late 2026, won’t need to use ASML’s high-NA EUV machines and can continue to rely on TSMC’s older extreme ultraviolet equipment, he said.

ASML’s new machine can imprint semiconductors with lines that are just 8 nanometers thick — 1.7-times smaller than the previous generation — and will be used for producing chips that will power artificial intelligence applications and advanced consumer electronics. The machines cost €350 million ($380 million) apiece and weigh as much as two Airbus A320s.

Still, TSMC has been an active participant in ASML’s high-NA EUV project. Jefferies analysts including Janardan Menon said they expect TSMC to use high-NA at the A14 node in 2028.

"I did complain to Nvidia's CEO Jensen Huang - the 'three trillion guy' - that his products are so expensive. I think those products are really valuable for sure, but I am thinking about showing our values as well," He said.

TSMC is the sole production partner for Nvidia's most advanced AI training chips, including its latest Blackwell line. Given the price of Nvidia's chips and TSMC's vital role in their production, Wei said, it would not take a genius to consider asking for a higher production fee.

Moreover, TSMC said it plans to repurchase 3.25 million shares on the Taiwan Stock Exchange on Wednesday. The buyback is aimed at offsetting stock dilution from shares issued to employees under incentive programs. Goldman Sachs stated that TSMC plans to repurchase its shares at the higher end of the range, which is expected to boost investor sentiment in the short term.

TSMC is considering raising its production fees for NVIDIA, Goldman Sachs released a research report saying. TSMC's chairman also revealed at shareholders' meetings that the company sees more room for price adjustment.

Goldman Sachs believed that TSMC is now facing higher cost pressures, and is working harder to implement its “selling its value” strategy. The Company may be trying to pass on costs to customers in order to achieve its long-term gross profit margin target of 53% and higher.

Goldman Sachs' target price was NT$975 on TSMC on consideration that the company's technology leadership position is solid, with rating at Buy.

Moreover, Morgan Stanley analysts hiked their price target on TSMC to NT$980 from NT$928, and rated the company as Overweight. The broker believed that TSMC needs to raise wafer prices to keep its gross margins above the target of 53% by 2025 and 2026.

NVIDIA’s CEO Jensen Huang pointed out that the price of TSMC's services was too low, and that TSMC's contribution to the world and to the technology industry was not adequately reflected in its financial reports.

NVIDIA is a major customer for TSMC, accounting for an estimated 10% of TSMC's revenue this year, said Morgan Stanley. Assuming that NVIDIA accepts TSMC's price increase, other key AI semiconductor customers may follow suit.

Source: Bloomberg, Investing