Potential Price Standoff in Semiconductor Industry: ASML and TSMC

Well-known analyst Ming-Chi Kuo has predicted that a pricing standoff may occur within the semiconductor industry.

What Happened: On Thursday, Kuo, who works at TF Securities, shared insights on X (formerly known as Twitter). He mentioned that there are market rumors suggesting that ASML Holding may increase equipment prices for the Taiwan Semiconductor Manufacturing Company or TSMC.

Despite these rumors, Kuo believes that TSMC, the largest chipmaker globally and ASML’s primary customer, will likely resist these price hikes.

He stated, "Market rumors suggest that ASML plans to raise equipment prices for TSMC. However, my understanding is that TSMC is likely to push for price reductions from ASML."— Ming-Chi Kuo

ASML is the only company that manufactures high-end extreme ultraviolet lithography systems, which are crucial for producing cutting-edge chips. TSMC depends on ASML’s EUV technology to produce advanced semiconductors for major clients, including tech giants such as Apple and Nvidia.

Kuo’s comments indicate that TSMC’s potential pushback against ASML could lead to a significant pricing standoff between the two companies.

Importance of the Situation

This situation arises after TSMC reported impressive third-quarter results, surpassing expectations due to increased demand for advanced processor node technologies, especially for AI applications. The company, which supplies chips to major corporations like Nvidia Corporation and Apple Inc., projected fourth-quarter revenue much higher than the consensus.

On the other hand, ASML recorded third-quarter net sales of 7.5 billion euros ($8.16 billion), exceeding analyst predictions of 7.12 billion euros. However, the company revised its full-year sales forecast upwards.

Earlier this year, TSMC raised concerns about the steep costs associated with ASML's new advanced chip machines. During a technology symposium, TSMC senior vice president Kevin Zhang discussed the high price tag of the high-NA extreme ultraviolet system, which amounts to around $380 million each.

Conclusion

The potential clash between TSMC and ASML over pricing poses critical implications for the semiconductor industry. Given the increasing competition and demand for advanced chips, how this standoff unfolds could significantly affect major companies within the tech sector.

semiconductor, prices, ASML