Chips are down for consumers with TSMC set to hike prices

Taiwan Semiconductor Manufacturing Co (TSMC) plans to increase the price of chips in the coming months, according to a media report.

The firm will raise prices by between 10% and 20%, the bigger rise applying to less advanced chips, the Wall Street Journal reported, citing unnamed sources familiar with the situation. The increases will come at the back end of this year or the start of next, they said. The paper was unable to obtain a comment on prices from TSMC itself.

The news, should it prove to be correct, should come as no surprise, given the well-documented global shortage of semiconductors at present. But although consumers may well have seen it coming, that doesn’t make it any less of a bitter pill to swallow when the price of goods starts to rise.

Naturally, much depends on whether the companies affected by both the shortages and the price rises – tech companies like smartphone makers and car manufacturers are top of the list – pass on the increased cost to their customers. Big brands could choose to absorb higher costs, but, as the Journal points out, chip shortages have already driven up laptop prices amidst growing demand stemming from the Covid-19 pandemic and associated shift to remote working. Even if companies choose to shield their customers from the increased prices, the shortages will likely mean lower production volumes, greater demand and higher prices anyway.

The report quotes Sinolink Securities analyst Andrew Lu as saying that putting up prices will help TSMC maintain its profit margins, having to date spent too heavily in the advanced end of the semiconductor market and lost market share in less advanced chips.

But there is a potential longer-term benefit for the firm too; charging more will help it invest in new capacity, as it has already indicated it needs to do.

“In order to keep up with demand, TSMC expects to invest USD$100 billion over the next three years to increase capacity to support the manufacturing and R&D of advanced semiconductor technologies,” the firm said in a statement in April, released following media speculation on its spending plans.

It added that it is “entering a period of higher growth,” fuelled by 5G and high-performance computing (HPC), as well as digital changes brought by Covid-19, which will drive semiconductor demand.

If TSMC increases production to match demand over the coming years, that has to be good news for the industry. But it seems there could be some short-term pain to get through first.

Leave a comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.