TSMC will charge more for chips made outside of Taiwan, possibly making devices more expensive

TSMC is the worlds biggest chipmaker and its products are found in everything from phones to game consoles and computers. But devices using TSMC chips could become more expensive if manufacturers opt to buy ones that the company makes outside of its home base of Taiwan.

If a customer requests to be in a certain geographical area, the customer needs to share the incremental cost, TSMC CEO CC Wei said on an earnings call. In todays fragmented globalization environment, cost will be higher for everyone, including TSMC, our customers and our competitors.

Talks with customers over price increases have already started. As the Financial Times points out, its more expensive for TSMC to manufacture chips outside of Taiwan (where over 90 percent of the planets most advanced semiconductors are made). But the company will be passing on those costs amid a push by companies and governments to increase chip supply outside of Taiwan, over which China is attempting to control.

TSMC has plants in Japan and is building several in Arizona, the first of which started operating this month and is expected to go into full production this year. Its also constructing a plant in Germany.

In addition, the US government last week agreed to provide the company with $6.6 billion in funding under the CHIPS Act, which seeks to bolster semiconductor manufacturing in the country. In return, TSMC pledged to up its US investment by $25 billion to $65 billion. Aligned with that, the company announced plans to build a third US plant by the end of the decade and to start making more advanced 2nm chips by 2028.

Meanwhile, TSMC expects its manufacturing costs to increase in Taiwan. Thats because power prices there are soaring. An earthquake earlier this month is also expected to have a negative effect on the companys profitability, as is its struggle to make the manufacturing of its most advanced 3nm chips more efficient.

Apple, NVIDIA, AMD and Qualcomm are among TSMCs more notable customers. So if they end up buying chips from the companys US, Japan or Germany fabs, their manufacturing costs could go up. Take a wild guess whod end up having to eat the cost of those increased expenses so device makers can maintain their profit margins.