Semiconductor Chip Inflation Risk - Taiwan Semi to Face Up to 25% Electricity Tariff Hike in Taiwan

Taiwan Semiconductor Manufacturing Co TSM, along with other internet data centers and large-scale industrial users in Taiwan, is poised to experience an increase in power tariffs ranging from 15% to 25% starting April 1, as announced by Taiwan’s Economics Ministry. 

This adjustment in electricity rates, which aims to alleviate the financial strain on the state-owned utility Taiwan Power Co. following its consecutive annual losses, is expected to have a ripple effect, potentially spurring inflation across the island. 

The households will see their electricity costs rise by 3% to 10%, Bloomberg reports.

Also Read: Taiwan Semi Spurs Semiconductor Investment Frenzy in Japan, Boosting Local Economy and Banking Sector

Bloomberg Intelligence technology analyst Charles Shum suggests that a rise of less than 30% will minimally impact TSMC, though escalating electricity costs could threaten the chip giant’s long-term profitability. 

The decision to raise electricity tariffs comes after Taiwan Power Co.’s significant losses, totaling NT$382.6 billion in 2023, as it strived to maintain low power prices amidst escalating fuel costs. 

These financial challenges are compounded by Taiwan’s reliance on imported coal and natural gas, whose prices have surged, particularly following geopolitical tensions. 

The Central Bank of Taiwan has adjusted its inflation forecast upwards in anticipation of the tariff increase, signaling concern over the potential for further inflationary pressures.

TSMC looks to build fabs for 2-nanometer chips in Taiwan’s Hsinchu and Kaohsiung cities amid reports of the chipmaker battling skyrocketing construction costs, labor crisis, and other operational challenges in the U.S.

The key Nvidia Corp NVDA supplier gained 51% in stock value in the last 12 months. Investors can gain exposure to the stock via VanEck Semiconductor ETF SMH and IShares Semiconductor ETF SOXX.

Price Action: TSM shares traded lower by 0.10% at $139.30 premarket on the last check Friday.

Also Read: Nvidia Supplier Taiwan Semi Rides AI Wave to Record Rally, Sidestepping Geopolitical Concerns

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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