Electronics set to rise as chip giants like TSMC, Samsung hike prices
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One man walks by the logo of TSMC at its headquarters in Hsinchu. Taiwan.
Sam Yeh | AFP | Getty Images
According to analysts, products that depend on semiconductors will become more costly as chip findries increase prices.
The world’s biggest foundries — including Taiwan Semiconductor Manufacturing Company, Samsung Intel — are considering further price hikes, analysts told CNBC.
CNBC was told by Peter Hanbury (Bain semiconductor analyst) that foundations have increased their prices between 10-20% and the year before. The company expects a smaller round of price hikes in the coming year (i.e. 5-7%).”
They are raising their prices because they can but it is also becoming increasingly difficult for them to finance their increasing operations.
“The chemicals that are used in [chip]Hanbury stated that manufacturing has increased by 10-20%.” Hanbury stated that the demand for labor to construct new semiconductor plants has seen a shortage and an increase in wages.
TSMC notified customers for the second year in a row that it intends to increase prices. Nikkei Asia reportedLast Tuesday, people were briefed by the citing authorities on the subject.
The Hsinchu-headquartered firm is reportedly planning to increase its prices by single digit percentage points. The reason behind the price increases is attributed to rising inflation, increasing costs, and expansion plans.
CNBC spoke with a spokesperson representing TSMC, who said that they don’t comment on pricing.
According to Bloomberg, Samsung, a rival, is planning to raise its prices for chipmaking by as much as 20% according to last Friday’s report. CNBC asked Samsung to comment, but it did not reply immediately.
Hanbury explained that because of the continuing shortage of semiconductor chips, manufacturers can charge a premium while customers push for supply. Hanbury also stated that his company expects certain chip shortages to end by year’s end.
CNBC reached out to Intel for comments but they did not respond immediately.
Inflation is rising
Glenn O’Donnell, a Forrester analyst, told CNBC that increasing chip prices shouldn’t surprise anyone in this economic climate. He also said that prices will rise approximately 10-15% or in line with inflation.
In the two most recent years, the global chip shortage has been fuelled by the pandemic coronavirus.
O’Donnell stated that chipmakers are facing their own supply problems, which have been exacerbated in the Ukraine conflict. “Demand remains high and supply remains limited,” O’Donnell added. O’Donnell said that energy prices have been on the rise, even for electricity. It takes a lot of power to make chips.
Companies that incorporate chips in their products might have to pass on the costs to customers despite an increasing cost of living crisis.
Hanbury stated that “increased chips prices will add stress for all of the downstream clients who will either have to pass these price increases on to their customers which would be difficult in the current climate or accept lower profitability.”
O’Donnell stated that he expected PCs, computers, toys, electronics for consumers, as well as appliances and other products, to become more costly.
He stated that margins are already tight for such products so it is impossible to increase prices.
Syed Alam, Global Lead in Semiconductor Technology AccentureCNBC’s, said that price rises will be affected by the percentage of the semiconductor cost in overall product costs. He said that manufacturers will need to be able cut in other areas as well as the competition for each product type.
Alam stated that products with more sophisticated chips, such as graphics processing units (GPUs) or high-end central processing units (CPUs), are likely to see an increase in their prices.
Hanbury stated that some industries are seeing a decrease in demand, and will struggle to pass on these increased costs to customers. He explained that the demand for smartphones has dropped and they won’t be able pass these costs on to their customers as well.
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