The world’s largest chip foundries – TSMC, Samsung and Intel – are considering raising chip prices. Speaking to CNBC, semiconductor analyst Peter Hanbury shared that over the past year, they have increased chip prices by 10 to 20%. This year, the increase continues but lower, from 5 to 7%.
Part of their decision to increase the chip is the increasingly expensive cost of expanding their operations. Specifically, chemicals used in chip production have increased by 10 to 20%. Similarly, the personnel needed to build new semiconductor factories are scarce, while wages rise.
Last week, Nikkei reported that TSMC warned for the second time in less than a year that it would raise product prices, citing inflation risks, rising costs and its own expansion plans. In South Korea, rival Samsung is expected to increase chip prices by up to 20%, according to information on Bloomberg.
With the chip crunch persisting, manufacturers can charge higher fees while customers compete for supply, Mr. Hanbury said. His company predicts that tensions with certain chips will ease slightly later this year.
Forrester analyst Glenn O’Donnell said the increase in chip prices is not surprising in the current economic environment. He predicts chip prices will increase by 10-15% or in sync with inflation.
Over the past two years, the Covid-19 epidemic has caused a chip crisis to break out. The Russia-Ukraine war also increased pressure on supply issues. Demand continues to increase while supply remains limited. Energy prices skyrocketed, including electricity prices, while production consumes huge amounts of electricity.
Despite the rising cost of living, companies that use chips in products may have to pass some of the costs on to customers if they don’t want to sacrifice profits. Mr. O’Donnell thinks computers, cars, toys, consumer electronics, home appliances and more will get more and more expensive.
According to Syed Alam, Global Head of Semiconductors at Accenture, the margin of price increase depends on the ratio of semiconductors to product costs. It must also take into account the manufacturer’s ability to cut costs in other activities and markets for each product category.
Looking at the above factors, products equipped with more modern chips such as GPUs and CPUs will tend to increase in price. But some areas such as smartphones that start to see a decrease in demand will have a harder time getting users to share the costs.