Taiwan’s state-owned energy company is looking to raise prices for industrial users, a move likely to impact chipmakers such as TSMC, which may well have a knock-on effect on the semiconductor supply chain.
According to Bloomberg, the Taiwan Power Company, which produces electricity for the island nation, has proposed increasing electricity costs by at least 8 percent for industrial users, the first increase in four years.
The power company has itself been hit by the rising costs of fuel, including the imported coal and natural gas it uses to generate electricity. At the same time, the country is experiencing record demand for power because of increasing industrial requirements and because of high temperatures driving the use of air conditioning, as reported by the local Taipei Times.
Taiwan’s peak electricity consumption topped 39GW towards the end of last week, which apparently set a new record. Taiwan Power is now predicting that the peak usage figure could easily surpass 40GW this summer.
While other countries are also facing rising energy costs, Taiwan holds a key position as one of the dominant players in the global chip market. Taiwanese companies account for 48 per cent of the semiconductor foundry industry and as much as 61 per cent of the world’s capacity to manufacture chips using 16nm production nodes or better.
According to a report from McKinsey [PDF], electricity can account for up to 30 percent of the operating costs for a chip fabrication plant, with a typical semiconductor fab using as much power in a year as about 50,000 homes. A significant rise in energy prices is therefore likely to result in higher chip prices as the costs are passed on to customers.
Taiwan-based TSMC and other semiconductor foundry companies had already been planning to increase the prices they charge for manufacturing chips, as we previously reported.
Meanwhile, analyst firm Omdia last week reported that the semiconductor market is flattening out after a period of record revenues for the chipmakers, reaching a plateau in the first quarter of 2022 following five straight quarters of record revenues and continual growth in demand.
Omdia predicted that chip industry is heading for a slowdown because of companies stockpiling components, in addition to the broader global economic issues and inflation. A rise in component prices due to growing energy costs is likely to add to the market uncertainty.
Earlier this month it was reported that chip manufacturers are investing heavily in new production facilities in order to any chip supply issues. Semiconductor industry group SEMI said it expected that Taiwanese firms will increase spending on equipment by 52 percent to $34 billion, accounting for 31 percent of total investments expected this year.
TSMC also recently revealed details of its much-anticipated 2nm production process node, which is set to be introduced in 2025, which will use a nanosheet transistor architecture. The company’s N3 node generation is set to enter volume production later this year. ®