TSMC rumored to hike advanced process prices 10%; Goldman Sachs raises ADR target to $600.
Global foundry leader TSMC is reportedly considering raising advanced process prices by 5% to 10%, leveraging its dominant near-75% global market share to demonstrate significant pricing power. The move comes as Goldman Sachs released a report raising TSMC's ADR price target from $550 to $600 while substantially revising upward its 2027 capacity estimates for 3nm, 2nm, and CoWoS advanced packaging. The firm's capital expenditure forecast was also lifted from $70 billion to $78 billion.
According to tech media outlets, TSMC may raise the selling prices of its advanced chip manufacturing processes by this 5% to 10% range. Since advanced processes at 7nm and below account for approximately 74% of TSMC's total revenue, this pricing adjustment would directly impact the company's gross and net profit margins. With nearly 75% of the global foundry market share, TSMC holds an extremely strong pricing position, particularly given continuously rising demand from AI data centers, smartphones, and personal computers.
TSMC's financial performance underscores the potential upside. The company's net profit margin increased by 7.4 percentage points year-over-year to 50.5% in the first quarter of 2026, while earnings per share surged 65% year-over-year. Market analysts previously expected TSMC's full-year 2026 EPS to grow about 48% to $15.80, though some believe there is room for upward revision if price hike benefits and AI chip demand exceed expectations.
Goldman Sachs substantially raised its advanced capacity estimates for TSMC in response to stronger customer demand. The firm predicts that by the end of 2027, 3nm wafer output capacity will reach 200,000 wafers per month, and 2nm will reach 140,000 wafers per month, both significant increases from previous estimates of 190,000 and 130,000 respectively. For advanced packaging, CoWoS capacity is projected to reach 280,000 wafers per month by end-2027, up from the prior estimate of 250,000.
Goldman Sachs projects TSMC's gross margins for 2026, 2027, and 2028 to reach 66.9%, 66.8%, and 67.3% respectively, substantially better than prior estimates. The firm forecasts USD revenue growth of 39%, 32%, and 28% year-over-year for 2026, 2027, and 2028 respectively. Based on a 22x price-to-earnings multiple on 2027 estimated EPS, Goldman Sachs raised its Taiwan-listed share target from NT$2,750 to NT$3,000 and its ADR target from $550 to $600.
Goldman Sachs attributes TSMC's improved profitability outlook to four key tailwinds: better pricing strategy, optimized product mix, sustained high capacity utilization, and continuously improving productivity. The firm believes these factors will substantially offset gross margin dilution from overseas fabs, with the impact of overseas expansion potentially milder than market expectations.
The rumored advanced process price hikes reflect TSMC's critical position in the global semiconductor supply chain. From data centers and gaming consoles to smartphones and automotive electronics, advanced products from major chip design companies are manufactured by TSMC. As AI applications expand across cloud training chips to edge inference chips, TSMC's capacity scarcity further highlights its pricing leverage.
Compared to mature processes facing pricing competition, the technological barriers of advanced processes give TSMC greater room for price maneuvering. If the price increase materializes, it will directly contribute to revenue and profit while potentially triggering a market re-evaluation of its valuation model. The market currently assigns TSMC a price-to-earnings ratio of approximately 20 to 22 times. Should AI demand continue to exceed expectations and drive further profit acceleration, valuation upside remains possible.
However, ultimate stock performance depends on multiple variables, including the global macroeconomic situation, sustainability of AI capital expenditure, and geopolitical risks affecting supply chain configurations. TSMC's second-quarter 2026 earnings call is scheduled for July 16, when management commentary on advanced process pricing, capacity planning, and gross margin outlook will draw close market attention.