TSMC is going to raise prices for Nvidia

Latest update time：2024-06-05

Reads：

????If you hope to meet more often, please mark the star ?????? and add it to your collection~

Source: Content from technews , thank you.

Nikkei reported that TSMC's new chairman, Wei Zhejia, said on the 4th that he is considering adjusting the production service fees for artificial intelligence (AI) chips and has discussed this issue with Nvidia CEO Huang Renxun.

The report pointed out that Wei Zhejia said at his first press conference after taking over as chairman, "I did complain to '3 trillion yuan man' (because Taiwanese media estimated Huang Renxun's net worth to be NT$3 trillion) Huang Renxun that his products were too expensive," "I think these products are really valuable, but I also want to show him our value." TSMC is the exclusive production partner of Nvidia's most advanced AI training chips, including the latest Blackwell series chips.

Wei Zhejia said that considering the cost of Nvidia chips and the key role TSMC plays in production, it is easy to understand the logic of wanting to raise production costs. "Everyone sitting at home can think of (this strategy)."

He also said that TSMC is still working hard to assess the future demand level for AI and how many chip factories will be needed to meet the demand, but he believes that OpenAI CEO Altman's comment that he would build more than a dozen more wafer fabs was "so positive that I couldn't believe it."

TSMC is working to address a surge in orders for high-end chips for generative artificial intelligence tools and services. The company discussed the supply of artificial intelligence chips with ChatGPT creator OpenAI. Wei Zhejia believes that the chip supply growth rate envisioned by OpenAI is "too fast."

“He’s so driven, it’s unbelievable to me,” Wei said of OpenAI CEO Sam Altman.

Altman discussed future cooperation with TSMC last year, including jointly building more than three dozen factories to ensure that the company can obtain enough silicon to meet the needs of continued growth.

The atmosphere of the talks was lively, but TSMC officials made it clear that the number of wafer fabs proposed by Altman was too large, and TSMC was worried about its ability to ensure that the factories would operate normally at 80% or higher capacity.

He said he would not compare the operating costs between Taiwan and the United States because the cultures, work styles and habits are completely different.

The most advanced manufacturing process remains in Taiwan

TSMC's new chairman, Wei Zhejia, said yesterday that he will still face geopolitical challenges after taking office, and he will strengthen communication with the government. Wei Zhejia said that 80% to 90% of TSMC's production capacity is in Taiwan, and it is impossible to move all of it out; TSMC's countermeasure is to prioritize Taiwan, starting from Taiwan and looking at the world.

Wei Zhejia also said that TSMC's overseas layout is currently progressing smoothly at the Kumamoto Plant 1 in Japan, so it immediately announced the construction of the second plant, which is scheduled to be completed by the end of the year. As for whether to build a third plant, the company's consideration is to first gain a firm foothold and wait until the first and second plants are on track before deciding whether to start the construction of the third plant.

Regarding the capacity deployment strategy under geopolitical conditions, he emphasized that TSMC's first priority for future investment is Taiwan, and the second and third priority is still Taiwan. Although the United States is about to plan a 2nm process, all the most advanced processes will definitely start in Taiwan.

As for the rapid development of AI, whether Wei Zhejia is worried about water, electricity and talent shortages. Wei Zhejia pointed out that with today's chip manufacturing technology, TSMC has worked with customers to develop high-performance and energy-saving chips. TSMC's demand for electricity will not grow as fast as before, and the extent of power saving will be quite obvious. Taiwan's power supply "should" not be a problem.

When asked if answering "yes" meant he was a little worried, Wei Zhejia said jokingly, "I was very worried after reading the reports, but I feel relieved after talking to the government." As for water use, TSMC has tried its best to recycle every drop of water, and there has been plenty of rainfall in the past few days, so there is no need to worry.

In terms of talent, Wei Zhejia said that TSMC will always be short of talent as it continues to expand production, and insufficient talent training is a problem that TSMC is worried about.

This year, the growth rate is 20% to 25%.

TSMC President Wei Zhejia reported at the shareholders' meeting that with the rise of generative AI applications, TSMC has outperformed its peers by virtue of its technological leadership and is in a favorable position to seize future AI and HPC-related growth opportunities. TSMC's performance is expected to grow quarter by quarter in 2024, thanks to its technological leadership and broad customer base. In US dollars, TSMC's full-year revenue is expected to grow between 20% and 25%.

Wei Zhejia pointed out that 2023 is full of challenges for the global semiconductor industry, but it also witnessed the rise of generative AI applications. TSMC's technological leadership and outperformed its peers in 2023, which also put us in a favorable position to grasp the future AI and HPC growth opportunities. Continue to focus on business, fundamentals and work closely with customers to plan production capacity and continue to invest in semiconductor process technology based on long-term market demand, and purposefully implement the global manufacturing same-machine strategy to support customer growth and increase their trust.

Wei Zhejia said that he is confident that he can control and minimize the cost gap with overseas wafer fabs, and thus continue to maximize shareholder value. We are investing in digital operations and using big data and AI to improve the productivity, operational efficiency and quality of wafer fabs. We will continue to strengthen the intelligence of wafer fabs to deepen customer service.

TSMC's major achievements in 2023 include wafer shipments reaching 12 million 12-inch wafer equivalents, advanced process sales accounting for 58% of total wafer sales, higher than 53% in 2022, providing 288 processes and producing 11,895 products for 528 customers. TSMC accounts for 28% of the world's pure logic semiconductor manufacturing output value, excluding semiconductors, memory, semiconductors, etc.

In addition to driving profitable growth in its core businesses, TSMC also continues to be committed to green manufacturing, establishing a responsible supply chain, creating a diverse and inclusive workplace, cultivating talent, and caring for the disadvantaged to fulfill its corporate citizenship responsibilities. As we head into 2024, although the uncertainty of the macro environment continues to exist, this year will be a year of healthy growth for TSMC. The latest semiconductor and packaging solutions for AI chips, a strong wafer manufacturing design ecosystem, and high-yield production of larger chips are all advantages and opportunities for TSMC. The role and responsibility of the global semiconductor industry cannot be ignored, and it will continue to uphold the trinity of technological leadership, operational manufacturing, and customer trust to support customers in unleashing innovation.

Wei Zhejia emphasized that no matter where the company operates, it will adhere to the highest standards of corporate governance, uphold the core corporate values of integrity, commitment, innovation and customer trust, and pursue sustainable development. It attaches great importance to customer trust and will continue to be committed to business operations, create performance and maximize shareholder value.

Looking ahead to 2024, the overall economic and geopolitical uncertainties will continue throughout the year, which may further affect consumer confidence and end-market demand. The overall semiconductor market, excluding memory, will experience a more moderate and gradual recovery in 2024. It is estimated that the semiconductor market will grow by about 10% year-on-year this year, and the wafer manufacturing industry will grow by high double digits, that is, nearly 20%. Thanks to its leading technology and broad customer base, TSMC's performance will grow quarter by quarter in 2024. In US dollars, the full-year revenue will grow by 20%~25%.

Liu Deyin: Buy TSMC stock

At TSMC's shareholders meeting, when small shareholders expressed their hope that the retiring chairman Liu Deyin could give them a word that would benefit everyone, Liu Deyin humorously said, "Buy TSMC stock."

Small shareholders asked whether TSMC would follow the example of foreign technology companies and repurchase shares. Moreover, since TSMC's share price is already high, have they considered splitting the shares so that the company's profits can be shared by more people? Liu Deyin said that there is no plan to repurchase shares now, but we hope that because our company is a company with a lot of funds and heavy assets, this part has already eaten up a large part of the profits. Therefore, we hope to distribute the rest to shareholders as much as possible. As for the situation where the share price is getting higher and higher, it is not that high now, and we will continue to work hard.

In this regard, Chief Financial Officer Huang Renzhao also said that the company has studied stock repurchases and cash dividends and believes that cash dividends are sustainable and that a gradually increasing cash dividend policy is the best return for shareholders. Therefore, regarding stock repurchases, we believe that it is an irregular situation that may not happen. Therefore, a stable cash dividend policy is better. As for the issue of stock splits, in fact, Taiwan's trading market already allows shareholders to purchase fractional shares during on-site trading, so the demand for stock splits should not be that high.

A small shareholder asked, AMD's Lisa Su announced a partnership with TSMC, but Jensen Huang recently appeared in the same photo with TSMC founder Morris Chang. Whose opinion is more important to TSMC? Liu Deyin said, "Wouldn't this problem damage our relationship with our customers?" Wei Zhejia added that in fact, both companies have a very good relationship with us, and we have grown together with them.

In addition, when a shareholder asked whether TSMC would be overtaken by its competitor Huawei, Liu Deyin said that TSMC considers every competitor very, very carefully, and we will always have competitors. It has nothing to do with Huawei or not. Our company is leading today, but what we are focusing on now is the speed of progress. Whether we are progressing faster than other competitors is the key to our attention. As for when we will be caught up, I think President Wei does not need to answer, because that is impossible.

In addition, in response to shareholders' questions about the high construction and operating costs of the US plant, but TSMC has to build it, Liu Deyin emphasized that every time the issue of building a plant in the United States is discussed, the high cost is raised. Of course, the cost is higher than in Taiwan. However, I believe that our factories in the United States are cheaper than those built by others in the United States, and they have to be built. This is a response to the fragmentation of the supply chain, and this is not just TSMC, other Taiwanese companies are also moving in this direction, we just did it earlier, and doing this, of course, requires a period of learning, just like 30 years ago when we built the first 8-inch plant and the 12-inch plant in Taiwan, there are many learning processes.

Finally, as Liu Deyin is about to retire, he expressed his emotional gratitude to all shareholders for their support before the shareholders' meeting. He also expressed his gratitude to the company's management team. He felt honored to lead such a leadership team for six years. Thank you everyone.

Three essential elements for selecting a successor

When TSMC's new chairman, Wei Zhejia, was communicating with the media yesterday, he talked about how to choose future successors. He believes that the successors must have integrity, respect and support for customers, and identify with the company's values.

Wei Zhejia communicated with the media for nearly an hour yesterday for the first time in his new identity. His humorous conversation attracted media from home and abroad to line up to take photos with him.

Wei Zhejia said at the beginning of the media exchange meeting yesterday that TSMC has changed its chairman. Although the person is different, the way of doing things and the values are the same and will not change. He will continue to chat with the founder Morris Chang to learn from his experience and wisdom.

When asked by the media whether he had arranged a successor, Wei Zhejia said humorously that it was a bit embarrassing to ask about the successor after he had just taken office. However, he also said that he wanted to promote the succession system so that the future succession can be well organized. At the same time, he also hoped that TSMC would develop towards younger and more institutionalized development, and would develop a training system to allow talents to grow.

Wei Zhejia believes that future successors must have the same values and cannot compromise or compromise at all. The first is honesty and integrity, and the second is respecting and supporting customers and helping them succeed. Only then will TSMC have business.

Wei Zhejia said that TSMC has been established for more than 30 years and has continued the same tradition. Whether it is values, concepts, or ways of doing things, they will not change and will continue to move forward. The company's three major principles are technological leadership, excellent manufacturing, and customer trust. The same will be true after he takes over. The company will also consider the succession system at different levels. In the future, it will develop towards younger and more institutionalized development, and will recruit talents from all over the world.

Wei Zhejia said that he is more worried that the speed of talent cultivation is not fast enough to keep up with the speed of factory expansion. He will continue to look for good talents and promote the growth of internal employees. He himself is also improving himself by reading books and striving for progress in his life.

Click here???? to follow us and lock in more original content

END

*Disclaimer: This article is originally written by the author. The content of the article is the author's personal opinion. Semiconductor Industry Observer reprints it only to convey a different point of view. It does not mean that Semiconductor Industry Observer agrees or supports this point of view. If you have any objections, please contact Semiconductor Industry Observer.

Today is the 3787th issue of content shared by "Semiconductor Industry Observer" for you, welcome to follow.