TSMC is actively shifting its 4nm chip production capacity toward 3nm lines as smartphone demand for older nodes continues to weaken, and this move reflects a broader slowdown in mobile chip orders while advanced computing demand keeps rising. The company now faces a clear imbalance where 4nm capacity sits underused, while 3nm production remains constrained due to strong demand from high-end applications.
According to a Taiwanese publication UDN, TSMC has already started converting parts of its 4nm production lines to support 3nm chips, as non-Apple smartphone customers scale back their 4nm orders. This transition is not instant, since even though most of the equipment can be reused, the process still takes between six and twelve months to complete.
Why 4nm Demand Is Falling
Smartphone chipmakers such as Qualcomm and MediaTek have reduced their 4nm production volumes, which directly impacts TSMC’s utilization rates for these nodes. Reports suggest that this cut translates to around 20,000 to 30,000 wafers, equal to roughly 15 to 20 million mobile chips that are no longer being produced at the same pace.
At the same time, rising memory costs are putting pressure on budget and mid-range phones, making it harder for brands to maintain pricing while keeping performance upgrades. DRAM and NAND now account for a large share of a phone’s total cost, which limits how much manufacturers can spend on processors built on nodes like 4nm.
- DRAM makes up about 35 percent of the bill of materials
- NAND contributes another 19 percent
- Together, memory accounts for 54 percent of total cost in budget phones
Memory Prices Are Reshaping the Market
LPDDR5 memory prices have already increased sharply and are expected to rise further, which adds another layer of pressure on smartphone brands that rely on aggressive pricing strategies. This shift changes how companies prioritize components, and it reduces demand for certain chip tiers.
Xiaomi President Lu Weibing highlighted how severe the situation has become:
“The magnitude of this round of memory price increases has indeed far exceeded expectations. The price of the same memory configuration has surged nearly fourfold compared with Q1 last year.”
He also pointed out that configurations like 12GB plus 512GB have seen major price jumps, which directly affects brands focused on value-driven products. That “surged nearly fourfold” increase now forces companies to rethink product pricing and feature balance.
TSMC Is Betting on 3nm
TSMC’s decision also ties into strong demand for advanced chips used in AI and high-performance computing, where 3nm nodes play a critical role. The company already faces supply constraints in this segment, and customers like Broadcom have flagged bottlenecks in accessing enough advanced capacity.
As a result, TSMC is aligning its production with future demand trends, where AI accelerators and high-end chips drive growth, while smartphone demand for mature nodes remains uncertain.
