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Global chip giants generally raise prices, and electronic products will also increase prices!

May 31, 2022


The semiconductor shortage is having an increasingly far-reaching impact, and analysts say electronics will also become more expensive in the future as global chip giants continue to raise prices.

Chip giants including TSMC, Samsung, and Samsung are considering further price increases, said Peter Hanbury, a partner at industry consultancy Bain & Company: "In the past year, chip foundries have raised prices by 10%-20%, and we expect this year There will be another round of price increases, but at a smaller rate, expected at 5%-7%.”

The reason why chip giants choose to raise prices is because they are in a seller's market and have the ability to raise prices. On the other hand, as their business continues to grow, foundries are also facing higher and higher cost pressures.

Hanbury pointed to a 10%-20% increase in chemicals used in chip manufacturing, as well as a shortage of labor needed to build new semiconductor facilities and a rise in wages.

Recently, for the second time in less than a year, TSMC notified customers of its plan to increase prices, according to media reports. It is reported that TSMC plans to increase prices by a few percentage points due to inflation concerns, rising costs and its own expansion plans. In addition, another major chip giant Samsung is also said to intend to increase chip prices by 20%.

The rise in chip prices shouldn't come as a surprise in the current economic environment, said Forrester analyst Glenn O'Donnell, who expects chip prices to rise about 10%-15%, or roughly in line with inflation.

O'Donnell pointed out that chipmakers themselves are suffering from severe supply problems, with high market demand and limited capacity, sharp rises in energy prices, including electricity, and these problems have been exacerbated even further by the outbreak of the Russia-Ukraine conflict. .

Hanbury warned that higher chip prices will put pressure on all downstream customers, who will either pass on the price increases to consumers, which will be tough in the current environment, or accept lower margins.

O'Donnell expects prices to rise for items such as personal computers, cars, toys, consumer electronics and home appliances, where profit margins are already so thin that manufacturers have no choice but to raise prices.

However, Hanbury said demand had already started to decline in some industries, such as smartphones, where it would be difficult for them to pass on higher costs to consumers.

Syed Alam, head of Accenture's global semiconductor business, said the magnitude of price increases will also depend on the share of semiconductor costs in the overall product cost, the ability of manufacturers to cut costs, and the competitive landscape in each product category.

Given these factors, prices of electronics using more advanced chips such as GPUs and high-end CPUs are likely to rise, Alam added.