Electronics Chip giants like TSMC, Samsung are going to increase the price of 7

A man walks past the TSMC logo at the company’s headquarters in Xinhua, Taiwan.

Sam Yeh | AFP | Getty Images

According to analysts, products that rely on semiconductors are becoming more expensive as chip foundries prepare to raise their prices.

The world’s largest foundries, including Taiwan Semiconductor Manufacturing Company, Samsung and Intel, are considering further price increases, analysts told CNBC.

Bain Semiconductor analyst Peter Hanbury told CNBC, “Foundries have already raised prices by 10-20% in the last year.” “We expect another round of price increases this year, but smaller (i.e. 5-7%).”

Foundries are raising their prices in part because they can, but because financing their growing activities is becoming more expensive for them.

“This chemical is used [chip] Manufacturing has increased by 10-20%, “said Hanbury.” Similarly, there has been a shortage of labor required to build new semiconductor facilities, and wage rates have risen. “

TSMC has warned clients for the second time in less than a year that it plans to raise prices, Nikkei Asia reported last Tuesday, citing brief excerpts.

The Hsinchu-headquartered company is reportedly planning to raise prices by a single percentage point. It cited inflation concerns, rising spending and its own expansion plans as reasons for the rise.

A TSMC spokesman told CNBC that the company did not comment on the price.

Elsewhere, rival Samsung is set to raise its chipmaking price by up to 20%, according to a Bloomberg report last Friday. Samsung did not immediately respond to a request for comment by CNBC.

“With the persistent shortage of semiconductor chips, manufacturers are able to charge a premium as consumers push to secure supply,” Hanbury said, adding that his firm expects deficits in certain chips to begin to decrease by the end of the year.

Intel did not immediately respond to a CNBC request for comment.

With rising inflation

Forrester analyst Glenn O’Donnell told CNBC that rising chip prices in the current economic climate will not surprise anyone, adding that he expects prices to be around 10-15% or more consistent with inflation.

In the last two years, the coronavirus epidemic has helped fill the global chip deficit.

“Chipmakers face their own growing supply problems that are exacerbated by the Ukraine war … and demand is high when supply is limited,” O’Donnell said. “The price of electricity, including electricity, has come down. Chipmaking requires a lot of electrical energy.”

Despite the severity of the life crisis, companies that integrate chips into their products may have to start paying for their consumers.

“Increased prices for chips will increase the pressure on all low-end customers who either have to pass on this price increase to their customers, which would be difficult in the current environment, or would be less profitable,” Hanbury said.

O’Donnell says he expects PCs, cars, toys, consumer electronics, appliances and many other products to become more expensive.

“The margins of such products are already tight, so they have no choice but to raise prices,” he said.

Syed Alam, Accenture’s global semiconductor lead, told CNBC that the rate of any price increase would depend on the share of semiconductor costs in overall product costs. He added that it would also depend on the ability of manufacturers to reduce costs in other areas and the competitive landscape of each product division.

“Looking at these issues, the price of products that use advanced chips like GPU (graphics processing unit) and high-end CPU (central processing unit) may go up,” Alam said.

But some sectors are starting to see lower demand and they will struggle to increase this cost to their customers, Hanbury said. “For example, demand in the smartphone market has declined, so they will not be able to pass these increases as much,” he explained.

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