Leading chip foundry Taiwan Semiconductor Manufacturing Co. (TSM), known as TSMC, reportedly plans to raise prices for both leading-edge and mature-technology chips. The news rocked semiconductor stocks on Wednesday.
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Taiwan-based DigiTimes reported Wednesday that TSMC is raising its manufacturing prices by 10% to 20% starting in 2022.
TSMC plans to hike prices of mature-technology chips processed using 16 nanometer-class and thicker nodes by 20%. Leading-edge chips with circuits smaller than 16 nanometers will see price increases of about 10%, DigiTimes said. Circuit widths on chips are measured in nanometers, which are one-billionth of a meter.
TSMC is increasing its prices to improve its gross profit margins, according to tech news site Tom’s Hardware. The move will raise costs for host of chips including central processing units, graphics processors, microcontrollers and system-on-a-chip devices.
Semiconductor Stocks Broadly Rise
TSMC rival Samsung Electronics also is reportedly planning to increase prices for its contract chip production, Focus Taiwan said.
On the stock market today, TSMC stock rose 4.4% to close at 117.03. Meanwhile, the Philadelphia semiconductor index, known as SOX, advanced 0.8%. The SOX includes 30 semiconductor stocks.
TSMC makes chips for a host of fabless semiconductor firms including Advanced Micro Devices (AMD), Apple (AAPL), Nvidia (NVDA) and Qualcomm (QCOM).
Needham analyst Charles Shi on Wednesday reiterated his buy rating on TSMC stock with a price target of 138.
“We believe TSMC will push for a pricing increase due to recent margin woes amid a global chip shortage, and will not see strong pushback from its customers as they already took higher prices elsewhere,” Shi said in a note to clients.
Microchip Technology Plans Stock Split
Elsewhere among semiconductor stocks, Microchip Technology (MCHP) announced a two-for-one stock split.
The Chandler, Ariz.-based company said it hopes to make its stock more attractive to retail investors. The stock split will be effective for shareholders of record after the market closes on Oct. 4.
Microchip stock rose 2.3% to 151.45 on Wednesday.
Semiconductor Stocks Facing Cyclical Downturn?
Meanwhile, Piper Sandler analyst Harsh Kumar on Wednesday noted that investors are growing more cautious about semiconductor stocks amid concerns about a cyclical downturn next year.
“While each company, product, and end market may vary, we feel current expectations suggest supply and demand will hit equilibrium in mid-2022 at a broad level,” he said in a note to clients. “At that point, concerns surrounding an inventory correction, macro downturn, or even just the return to normal seasonal growth could put the industry at an inflection.”
Semiconductor industry trends look positive into early next year, Kumar said. But the outlook is “a bit murky” for the second half of the year.
Among the semiconductors stocks he covers, Kumar believes Broadcom (AVGO) is best positioned to weather a downturn given its diversification and strong market position.
On the other hand, AMD and Nvidia are more at risk during a downturn because of each company’s premium growth multiple, he said.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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