NVIDIA’s rapid growth on the back of the AI boom has made it one of the world’s most valuable companies and has also increased the net worth of CEO Jensen Huang.
Now, major supplier Taiwan Semiconductor Manufacturing Co. (TSMC) seems keen to join the frenzy.
“I once complained to Nvidia CEO Jensen Huang (aka the ‘Three Trillion Dollar Man’) that his products were too expensive,” TSMC CEO CC Wei told the Nikkei newspaper last week.
Wei was referring to Nvidia’s market capitalization, which surpassed $3 trillion last week. The AI chipmaker delivered another surprise earnings report last month, with first-quarter revenue and profits both beating Wall Street expectations.
Wei added that Nvidia’s products are “certainly very valuable, but we’re also looking to demonstrate our value.”
Wei’s comments sparked speculation that TSMC, the world’s largest contract chipmaker, was considering raising prices. TSMC According to one estimate, The most advanced 90% in the world Processor chip.
TSMC tried to quell market speculation last week, telling local media that its pricing has always been “strategic, not opportunistic.”
In April, an analyst asked whether TSMC was benefiting from the AI boom and what the CEO thought about pricing.
“We’re pleased that our customers are doing well. If our customers are doing well, TSMC is doing well,” Wei said.
Nvidia’s Huang doesn’t seem worried about TSMC’s price hikes.
He told reporters in Taiwan last week that TSMC’s contributions to the industry are “really great.”
“Increasing prices is consistent with the value they provide. I’m very happy to see them being successful,” Huang said.
Morgan Stanley analysts wrote last week that Nvidia’s management is likely aware of TSMC’s reliability.
“If NVIDIA accepts the price increases, we believe other major AI semiconductor customers may follow suit,” the analysts wrote in a note.
They projected that Nvidia would account for 10% of TSMC’s revenue in 2024.
TSMC has already hinted at raising production prices outside Taiwan
This isn’t the first time this year that TSMC has signaled a price hike.
Wei said in April that he planned to raise fees for customers who want to manufacture chips outside Taiwan.
““TSMC and our customers have undoubtedly had to share additional costs if our customers wanted to expand into certain areas,” TSMC’s CEO said during a conference call to announce the company’s first-quarter earnings. “In today’s fragmented, globalized environment, costs will be higher for everyone, including TSMC, our customers, our competitors and the semiconductor industry as a whole.”
Taiwan also raised electricity prices for large industries in April, which will weigh on TSMC’s profits. Wei said inflation and electricity were driving up costs.
“We expect customers to help shoulder some of the increased costs and we have already begun discussions with them,” he said, declining to discuss details of the company’s pricing strategy during the earnings conference call.
The production of chips used in everything from data centers to smartphones is now a geopolitical concern because much of the world’s chip production is concentrated in Taiwan, an independent state that China claims as its territory.
There are concerns that a Chinese invasion of Taiwan would have a negative impact on the global economy and could lead to Beijing seizing TSMC’s facilities.
TSMC is diversifying its production Opening a new facility in Arizona Japan, and Germany.
Wei said last week that TSMC was considering moving some of its semiconductor factories outside Taiwan, but that it would not be possible for the company to move all of its production outside the island.
TSMC’s Taiwanese shares closed down 1.7% at NT$879 per share on Friday, but are up 48% this year. Taiwan markets are closed on Monday for a public holiday.
Nvidia shares closed down 0.1% at $1,208.88 per share on Friday after rising more than 140% this year, ahead of a 1-for-10 stock split after the close of trading.
TSMC did not immediately respond to Business Insider’s request for comment.
