At GTC (GPU Technology Conference) on the 17th of this month, NVIDIA is expected to unveil its new AI server model, the GB300. Analysts observe that geopolitical factors have increased production costs in America due to tariffs and other supply chain challenges; contract manufacturers are now facing intensified competition with shortened delivery lead times, weakening their bargaining power as they struggle to pass these higher costs onto clients. Only TSMC (Taiwan Semiconductor Manufacturing Company), leveraging its advanced technology leadership, possesses the ability to raise prices.

Since Donald Trump assumed office and implemented tariffs—including those targeting China—Taiwanese contract manufacturers with substantial production bases in China have faced increasing pressure. Consequently, many are relocating their manufacturing capabilities to America or other tax-efficient regions to mitigate rising costs that would otherwise erode profits. TSMC recently announced an additional $10 billion (approximately NT$329 billion) investment in the US.

However, establishing factories within the United States entails higher electricity and personnel expenses; effectively managing these expenditures has become a critical challenge for Taiwanese supply chains. Furthermore, as upstream options expand with more established American supply chain infrastructure, former foreign equity analyst Chen Huiming (now partner at Hong Kong Polycore Capital Management) told CNA that companies like Supermicro were previously considered capable of commanding higher prices due to their ability to deliver quickly and meet high demand. However, the increased competition among contract manufacturers has significantly shortened lead times for early deliveries, diminishing overall bargaining power.

Chen Huiming emphasizes that technical capability remains paramount: advanced processes such as 4nm, 3nm, or even 2nm are largely exclusive to TSMC due to limited alternatives in the market. This exclusivity provides them with stronger negotiating leverage. He also noted that geopolitical issues present challenges for TSMC; semiconductors are a designated priority industry under the Trump administration and despite not all manufacturing returning to America being feasible, semiconductor production is deemed crucial enough to potentially impact national security—even if TSMC prefers to maintain a low profile, pressure has increased.

Despite NVIDIA’s robust demand for AI chips significantly contributing to TSMC's revenue stream, Apple remains its largest client. Chen Huiming estimates that last year NVIDIA accounted for approximately 8% to 9% of TSMC's total revenue and this figure could rise to around 14-15% in the current fiscal year. Even if sales from Apple remain consistent with those of last year, they would still represent over 20%, solidifying its position as TSMC’s largest client.

(Author: Wu Jiahou; Image source: NVIDIA)