If you want to gauge just how desolate the smartphone landscape has turned over the past few months, look no further than TSMC, which is now moving its increasingly idle 4nm capacity into still-constrained 3nm chip production lines as smartphone-led demand for the more mature nodes faces utter decimation.
TSMC forced to recalibrate its production lines in favor of the more advanced 3nm process as smartphone-led demand for the more mature nodes continues to collapse
According to a Taiwanese publication, TSMC is currently in the process of converting its 4nm-based chip production lines into 3nm ones as "non-Apple mobile phone customers have started to adjust the 4nm [demand] projections."
Of course, while between 80 percent and 90 percent of the equipment used in the 4nm process can be leveraged in the 3nm production lines, the process is quite cumbersome. As such, TSMC expects this conversion to take anywhere between 6 and 12 months.
This comes as both MediaTek and Qualcomm appear to have slashed their production cadence for 4nm chips, which feature prominently in low and mid-tier smartphones. As such, this production curtailment currently equates to around 20,000 to 30,000 wafers, which corresponds to a volume of between 15 million and 20 million mobile chips.
And, if you are wondering why TSMC is doing so if demand for memory chips is already supposedly moderating, as evidenced by the recent reduction in spot DRAM prices, think again. LPDDR5 contract prices, which are currently hovering at around $10/GB after undergoing a 3x increase since Q1 2025, are expected to undergo a double-digit percentage increase in 2027 as well.
These memory-led pricing pressures are hitting the entry-level and mid-tier smartphone segments particularly hard, especially given their limited pricing-related maneuverability. Consider the fact that DRAM costs now make up a whopping 35 percent of the Bill of Materials (BOM) of a given entry-level handset, while NAND costs add another 19 percent. Together, these two components now make up a whopping 54 percent of a budget smartphone's total cost! This should help place TSMC's decision to convert its 4nm production lines within some much-needed context.
And, we give the final word to Xiaomi's President, Lu Weibing, who recently noted:
"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. The 12GB+512GB version has gone up by about RMB 1,500, while the 16GB+1TB version has risen to an absurd degree. This has had a major impact on REDMI, which has always been priced around extreme value for money."
About the author: Writing is my one incontrovertible passion. Over the past six years, he has authored over 2,200 distinct articles on financial and tech-related topics, spanning nearly 1 million words. And he has been a member of Wcctech mobile team since 2025. As an alumnus of the University of Toronto, Rotman Commerce Program, I bring nuance, in-depth knowledge, and a unique perspective to every topic that I cover. When I'm not writing, I'm traveling the world, exploring hidden confectionaries and restaurants as an aspiring food connoisseur.
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