A man walks past the TSMC logo at the company’s headquarters in Hsinchu, Taiwan.
Sam Ye | AFP | Getty Images
According to analysts, products that rely on semiconductors will become even more expensive as chip foundries prepare to raise prices.
The world’s largest foundries, including Taiwan Semiconductor Manufacturing Company, Samsung and Intel, are considering further price increases, analysts told CNBC.
“Foundries have already raised prices by 10 to 20 percent over the past year,” Bain semiconductor analyst Peter Hanbury told CNBC. “Additional price increases are expected this year, but smaller (eg 5-7%).”
Foundries are raising prices partly because they can, but also because it costs more to fund their growing operations.
“Chemicals used in [chip] “Manufacturing has increased by 10 to 20 percent,” Hanbury said. “Likewise, there is a shortage of labor needed to build new semiconductor facilities, and wages have increased.”
TSMC has warned customers that it plans to raise prices for a second time in less than a year. Nikkei Asia Press Last Tuesday, I was briefed on this matter, citing people.
The Hsinchu-based company is known to plan to raise prices by single-digit percentage points. Inflation concerns, rising costs and plans to self-expand were cited as reasons for the price increase.
A spokesperson for TSMC told CNBC that the company did not comment on pricing.
Elsewhere, competitor Samsung is set to raise chip manufacturing prices by up to 20%, according to a Bloomberg report last Friday. Samsung did not immediately respond to CNBC’s request for comment.
“Manufacturers can charge a premium as customers continue to push to secure supply due to the continued shortage of semiconductor chips,” Hanbury added. His company added that it expects shortages of certain chips to begin to ease by the end of the year.
Intel did not immediately respond to CNBC’s request for comment.
rise with inflation
Forrester analyst Glenn O’Donnell told CNBC that the rise in chip prices would not surprise anyone in the current economic climate, adding that he expects the price to match roughly 10-15% or inflation.
Over the past two years, the coronavirus pandemic has helped fuel chip shortages worldwide.
O’Donnell said: “Chip makers are facing their own growing supply problems, exacerbated by the war in Ukraine, and supply is limited while demand is still high.” “Energy prices, including electricity, are also plummeting. Chip manufacturing requires huge amounts of power.”
Despite the deepening cost of living crisis, companies that incorporate chips into their products may have to start passing the cost on to consumers.
“Chip price increases will add stress to all downstream customers who have to pass these price increases on to their customers,” Hanbury said.
O’Donnell said he expects PCs, cars, toys, consumer electronics, consumer electronics and many other products to become more expensive.
“These products already have tight margins, so we have no choice but to raise the price,” he said.
Syed Alam, Global Head of Semiconductors Accenture told CNBC that the extent of the price increase will depend on the share of semiconductor costs in total product costs. He added that it also depends on the ability of manufacturers to cut costs in other areas and the competitive landscape of each product category.
“If you look at these factors, the price of products that use high-end chips such as GPUs (graphic processing units) and high-end CPUs (central processing units) is highly likely to rise,” Alam said.
However, demand is starting to decline in some sectors and it will be difficult to pass on these cost increases to customers, Hanbury said. “The smartphone market, for example, will not be able to pass on this increase because demand has decreased,” he explained.