Your smartphones, and almost every other consumer electronics product, may get a tad more expensive soon. The Taiwan Semiconductor Manufacturing Company (TSMC), which makes chips for almost every big chip company in the world, has reportedly told its customers that incoming chip production prices will be hiked substantially. Which would mean that the cost of smartphones using these chips will increase for their respective OEMs, who in turn might be forced to pass on the cost to consumers. Since TSMC makes chips for companies like Qualcomm and Apple, it’s likely that the entire industry will be affected by this change.
That said, reports indicated that TSMC is planning to increase prices of 7nm and thinner manufacturing processes by as much as 10%. On the other hand, the price of the 16nm manufacturing process will be increased by 20% from December, and prices of 28nm manufacturing nodes will be increased by “nearly $3000” from January onwards. The company’s 5nm and 7nm nodes accounted for almost half of its overall revenue in the second quarter of the year, suggesting that it is essential for a huge number of devices today.
TSMC earned a total of $13.29 billion in the second quarter, and increasing the prices will further help the company’s bottomline. The 16nm and 28mn processes also accounted for 25% of the business, so TSMC’s earnings should see a healthy increase in the next two quarters. Of course, raw material prices have also gone up in the past year, so it’s possible that the company is simply increasing prices in order to accommodate its own increased costs.
That said, it’s worth noting that TSMC’s price hikes may not necessarily mean that your next smartphone will be more expensive. For one, companies like Apple and Samsung, which sell really premium phones, can absorb a 10% price hike instead of passing it on to consumers. The problem, if at all, will be for budget devices built on these more expensive chips. Other chip foundries, like Powerchip Semiconductor Manufacturing (PSMC), Semiconductor Manufacturing International (SMIC) and United Microelectronics (UMC) have also increased their prices recently.
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