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Leading chip foundry Taiwan Semiconductor Manufacturing Co. (TSM), known as TSMC, reportedly intends to increase the prices of both advanced and mature technology chips. The news rocked semiconductor stocks on Wednesday.
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Taiwan-based DigiTimes reported on Wednesday that TSMC is increasing its manufacturing prices by 10% to 20% from 2022.
TSMC plans to increase the prices of mature technology chips processed with nano-class nodes by 20% and 20% thicker. State-of-the-art chips with circuitry smaller than 16 nanometers will see their prices rise by about 10%, DigiTimes said. Circuit widths on chips are measured in nanometers, or one billionth of a meter.
TSMC is raising prices to improve gross profit margins, according to technology news site Tom’s Hardware. This move will increase the costs of many chips, including central processing units, graphics processors, microcontrollers and systems on a chip.
Semiconductor stocks increase widely
TSMC’s rival Samsung Electronics also plans to raise prices for its production of contracted chips, Focus Taiwan said.
On the stock exchange today, TSMC shares rose 4.4% to close at 117.03. Meanwhile, the Philadelphia semiconductor index, known as SOX, rose 0.8%. SOX includes 30 stocks of semiconductors.
TSMC manufactures chips for a multitude of fabless semiconductor companies, including Advanced micro-systems (AMD), Apple (AAPL), Nvidia (NVDA) and Qualcomm (QCOM).
Needham analyst Charles Shi reiterated his buy rating on TSMC on Wednesday with a target price of 138.
“We believe TSMC will push for a price increase due to recent margin issues amid a global chip shortage, and will not see strong reluctance from its customers as they have already taken higher prices elsewhere,” Shi said in a note to customers.
Microchip Technology plans stock split
Elsewhere among semiconductor stocks, Microchip technology (MCHP) announced a two-for-one stock split.
The Chandler, Arizona-based company said it hopes to make its shares more attractive to retail investors. The stock split will be effective for shareholders of record after market close on October 4.
Microchip stock rose 2.3% to 151.45 on Wednesday.
Semiconductor stocks facing a cyclical downturn?
Meanwhile, Piper Sandler analyst Harsh Kumar noted on Wednesday that investors are increasingly cautious of semiconductor stocks amid concerns of a cyclical slowdown next year.
“Although each company, product and end market may vary, we believe current expectations suggest that supply and demand will balance out by mid-2022 at a general level,” he said in a statement. note to customers. “At this point, concerns about an inventory correction, a macroeconomic slowdown, or even just a return to normal seasonal growth could put the industry in an inflection.”
Semiconductor industry trends look positive for the start of next year, Kumar said. But the outlook is “a little gloomy” for the second half of the year.
Of the semiconductor stocks he covers, Kumar thinks 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 in a downturn because of the multiple growth in premiums of each company, he said.
Follow Patrick Seitz on Twitter on @IBD_PSeitz for more articles on consumer technology, software, and semiconductor stocks.
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