The surge in demand for AI chips is reshaping the pricing landscape of the global wafer foundry market. After Samsung Electronics Co., Ltd. took the lead in raising its foundry service prices, market expectations are growing that industry leader Taiwan Semiconductor Manufacturing (TSMC) will follow suit comprehensively, with plans to implement a 10% to 15% price increase across all its process nodes. This marks the beginning of a new cycle of expanding profit margins for top-tier chip manufacturers.

Capacity shortages are the direct catalyst driving this round of price hikes. According to reports from TrendForce and Nomura Securities, Taiwan Semiconductor Manufacturing has already completed a new round of price negotiations with clients in mid-year. For the second half of the year, it implemented price increases of up to 15% for specific 3nm (N3) processes facing supply shortages. By early 2027 at the latest, Taiwan Semiconductor Manufacturing also plans to further raise prices by 5% to 10% for advanced processes such as N2, N3, and N5.

The expectation of price increases has quickly transmitted to the capital markets, prompting Wall Street institutions to significantly raise their valuations of Taiwan Semiconductor Manufacturing. Institutions including Citigroup, Bank of America, and Macquarie have all lifted their target prices for TSMC, with the highest seeing NT$4,200. Institutions generally believe that rigid AI demand and enhanced pricing power will directly boost the long-term profitability of Taiwan Semiconductor Manufacturing and its related supply chain.

This return of pricing power began with Samsung Electronics Co., Ltd. According to Reuters, Samsung Electronics Co., Ltd. raised its foundry prices for 4nm and 5nm processes by 10% to 15% in July, with prices for the mature 8nm process also increasing by nearly 10%. Benefiting from the spillover effect of TSMC's capacity constraints, Samsung Electronics Co., Ltd.'s long-loss-making foundry business has encountered a significant turning point.

Capacity crunch leads to comprehensive price hikes across TSMC's foundry quotes

TSMC's advanced process capacity is currently at full load. Market data indicates that its N2 and N3 process chips have been almost entirely booked by Apple and NVIDIA. To meet the demand for the new Nova Lake desktop processors launching in early 2027, competitor Intel will not only use its own 18A process but also expand its procurement of N2X process chips from Taiwan Semiconductor Manufacturing, further intensifying the capacity tightness.

Against the backdrop of supply falling short of demand for advanced capacity, Taiwan Semiconductor Manufacturing's pricing strategy is spreading across its entire product line. According to market research reports, in addition to the significant price increase for N3 processes, mature process chips such as N12, N16, and N28—which have not seen adjustments for three consecutive years—will also see catch-up price increases, with the highest increase reaching 10%. This means that starting from the second half of this year, Taiwan Semiconductor Manufacturing will gradually and comprehensively raise prices for all its foundry chips.

A Citigroup Securities report believes that, benefiting from the strong demand for AI chips from global tech giants, Taiwan Semiconductor Manufacturing's advanced process capacity utilization will remain at high levels. In particular, the rigid demand for N2 and N3 chips will support its foundry prices steadily climbing until 2027. It is understood that the starting price for TSMC's N2 wafers has already reached US$30,000, enjoying a 10% to 20% premium over N3.

Capital expenditure hits new highs, Wall Street significantly raises earnings forecasts

To widen the technology and scale gap with Samsung Electronics Co., Ltd. and Intel, Taiwan Semiconductor Manufacturing is accelerating its capacity expansion.

A CLSA report indicates that Taiwan Semiconductor Manufacturing's capital expenditure is projected to reach US$80 billion in 2027 and expand to US$90 billion by 2028. This year, TSMC's capital expenditure has already been raised to a record high of US$52 billion to US$56 billion, and in July it announced an additional US$265 billion investment in the United States, planning to build multiple wafer fabs and advanced packaging facilities in Arizona.

Strong pricing power and capacity expansion have led foreign investment banks to consistently hold a positive outlook on its profitability. Bank of America, Goldman Sachs, and Citigroup have reached a consensus on Taiwan Semiconductor Manufacturing's earnings per share (EPS) for 2026 to 2028. They estimate EPS will surpass NT$100 in 2026 and challenge NT$170 to NT$200 by 2028. All institutions have given ratings of "Buy" or "Outperform," with target price ranges centered around NT$3,700 to NT$3,800.

The optimistic sentiment in the capital markets also extends to the industry chain. Although TSMC's stock price recently fell to NT$2,375 amid a pullback in the Philadelphia Semiconductor Index, institutions believe that with revenue hitting record highs and expectations of comprehensive price increases of 10% to 15%, the current moment presents a good opportunity to build positions at lower levels.

Meanwhile, TSMC's expansion plans have driven supply chain companies in semiconductor equipment, materials, and cleanroom services to achieve double-digit revenue growth in the first seven months of this year, with overall industry visibility extending beyond 2027.

Samsung fires the first shot on price hikes, raising prices for both advanced and mature processes

According to Reuters, Samsung Electronics Co., Ltd. implemented price increases of up to 15% for new orders on certain advanced process foundry services in July.

Specifically, prices for 4nm (SF4) process chips for clients in mainland China and the United States increased by 10% to 15%, 5nm (SF5) wafer prices also rose by 10% to 15%, and 8nm process prices increased by nearly 10%.

From a market perspective, Samsung Electronics Co., Ltd.'s price hike carries significant signal value. According to data from research firm Counterpoint, in the first quarter of 2026, Taiwan Semiconductor Manufacturing's share of global foundry revenue was approximately 73%, Samsung Electronics Co., Ltd. had about 7%, and SMIC around 5%. Samsung Electronics Co., Ltd.'s foundry division has been loss-making since 2022 and has long been unable to effectively narrow the gap with Taiwan Semiconductor Manufacturing.

The customer roster for Samsung Electronics Co., Ltd.'s foundry business is rapidly expanding, further solidifying its confidence in raising prices. Tesla and Apple signed chip manufacturing agreements with Samsung Electronics Co., Ltd. last year. In July this year, Samsung Electronics Co., Ltd. announced an AI chip production partnership with Broadcom. In March, NVIDIA CEO Jensen Huang stated that Samsung Electronics Co., Ltd. would provide foundry services for its new AI inference processors. Additionally, Google is currently in talks with Samsung Electronics Co., Ltd. to use the SF4 process for chip production.

Samsung Electronics Co., Ltd. expects advanced processes to account for more than half of this year's foundry revenue, with AI and high-performance computing applications contributing over 30%, up from 15% to 20% at the end of 2025. The SF4 production line at Samsung Electronics Co., Ltd.'s Pyeongtaek plant in South Korea has been running at full capacity since late last year, producing logic chips for clients such as Qualcomm and also manufacturing base dies for its own high-bandwidth memory (HBM) chips.