Electronics set to get more expensive as chip giants raise prices - CNBC

Electronics set to get more expensive as chip giants raise prices – CNBC

A man passes by the TSMC logo at the company’s headquarters in Hsinchu, Taiwan.

Sam Yeh | AFP | Getty Images

The cost of semiconductor-based products is set to increase as chip foundries prepare to increase their prices, according to analysts.

Analysts told CNBC that the world’s largest foundries – including semiconductor maker Taiwan, Samsung and Intel – are considering further price increases.

“The foundries have really increased prices by 10-20% in the past year,” Peter Hanbury, an analyst at Bain Semiconductor, told CNBC. “We expect another round of price increases this year, but lower (ie 5-7%).”

The foundries are increasing their prices in part because they can, but also because financing their growing operations is becoming more expensive for them.

Chemicals used in [chip] Hanbury said manufacturing increased 10-20%. Likewise, the labor required to build new semiconductor facilities has also seen shortages and an increase in wage rates.

TSMC has warned customers for the second time in less than a year that it plans to raise prices, Nikki mentioned Asia Last Tuesday, according to people who saw the topic.

The company, headquartered in Hsinchu, is said to be planning to increase its prices by one percentage point. It cited looming inflation fears, rising costs and its own expansion plans as the reason for the price hike.

A TSMC spokesperson told CNBC that the company does not comment on its pricing.

Elsewhere, rival Samsung is set to increase chip manufacturing prices by as much as 20%, according to a Bloomberg report last Friday. Samsung did not immediately respond to CNBC’s request for comment.

“With shortages in semiconductor chips continuing, manufacturers can charge a premium as customers continue to push to secure supplies,” Hanbury said, adding that his company expects shortages to begin to ease on some chips by the end of the year.

Intel did not immediately respond to CNBC’s request for comment.

rises with inflation

High chip prices should not surprise anyone in the current economic climate, Forrester analyst Glenn O’Donnell told CNBC, adding that he expects prices to rise by about 10-15%, or roughly in line with inflation.

Over the past two years, the coronavirus pandemic has helped fuel a global chip shortage.

“Chip makers are facing their own increased supply issues exacerbated by the Ukraine war…Demand remains high while supply remains constrained,” O’Donnell said. “Energy prices are also in a state of rupture, including electricity. The chip industry requires a huge amount of electrical power.”

Despite the rising cost of living crisis, companies that are incorporating chips into their products may have to start passing on costs to consumers.

“Increasing chip prices will put more pressure on all downstream customers who will need to either pass on these price increases to their customers, which would be difficult in the current environment, or accept reduced profitability,” Hanbury said.

O’Donnell said he expects the cost of computers, cars, games, consumer electronics, appliances, and many other products to rise.

“Margins are really tight on such products, so they have no choice but to raise prices,” he said.

Syed Alam, Head of Global Semiconductors at Accenture told CNBC that the size of any price increases will depend on the share of the cost of semiconductors in the total cost of the product. It will also depend on manufacturers’ ability to cut costs in other areas and the competitive landscape of each product category, he added.

“Given these factors, products that use more advanced chips such as graphics processing units (GPUs) and high-end CPUs (CPUs) are likely to have higher prices,” Alem said.

But Hanbury said some sectors are starting to see a drop in demand and will find it difficult to pass on those cost increases to their customers. “For example, the smartphone market has seen a drop in demand, so they won’t be able to outpace these increases as much,” he explained.

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