TSMC plots up to 20% price hike amid global chip crisis

TSMC
Image: Shutterstock via Dennis

The price increases could have repercussions on the global electronics market

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27 August 2021 | 0

Taiwan Semiconductor Manufacturing Company (TSMC) will raise the prices of its chips by as much as 20%, which could have a knock-on effect of raising prices for consumer electronics by 2022.

The world’s largest chipmaker will increase the prices of its most advanced chips by 10%, while less advanced chips will be priced at 20% higher, according to the Wall Street Journal (WSJ), speaking with sources familiar with the strategy.

The latter category includes chips used by customers such as car manufacturers, while chips set for a 10% increase include microprocessors used in iPhones, for example. This hike would lead to higher prices taking effect from next year.

 

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These changes come amid an ongoing global chip crisis, in which the supply of semiconductors has been running low for several months.

TSMC sees this price increase as serving the dual purposes of pushing down demand and preserving supply for customers in need, and increasing revenue that can subsequently be channelled into raising production capacity, WSJ reported.

The firm suggested only last month that the chip shortage would extend into 2022, with higher demand helping to fuel the company’s strong financial performance in the second quarter of the year. TSMC reported a profit increase of 11% from the previous year, alongside a revenue growth of 28%.

TSMC CFO Wendell Huang told analysts this growth was driven mainly by strength in high-performance computing (HPC) and automotive-related demand. Moving into the next quarter, Huang expects TSMC’s business to be supported by strong demand for its 5nm and 7nm chips for smartphones, HPC, IoT and automotive applications.

Because TSMC is the biggest foundry-owning chipmaker in the world and enjoys market dominance, it can control prices with relative assurance. It can enjoy particularly strong influence over the market during the global chip shortage due to stronger-than-ever demanding that is unrelenting.

While TSMC has certainly benefited financially from the shortage, it’s had a knock-on effect on other industries. For instance, growth in the PC market has been hampered by the crisis, with year-on-year growth slowing from 35.7% in the first quarter of 2021 to 4.6% in the second quarter.

© Dennis Publishing


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