TSMC, Samsung Plan Price Hikes For Chip Designers – Reports

Just as costs for some components have started to come down, TSMC and Samsung, the two largest contract chip manufacturers in the world, are reportedly planning to increase prices of production, which may affect Nvidia, AMD, Apple, and others that rely on the foundries.

Reports emerged earlier this week stating that Taiwan-based TSMC is planning price hikes in the single-digit percentages for legacy and advanced chip manufacturing technologies next year. Citing industry sources, Nikkei reported that the price hike will be around five to eight percent.

On Friday Bloomberg reported that South Korea's Samsung is planning to raise prices for chip designers by 15-20 percent this year, citing industry sources. Legacy nodes will be hit hardest, and the new pricing will come into effect in the second half of the year.

Over the course of the pandemic, high demand for electronics has overloaded semiconductor plants, giving foundries power to raise the prices of wafers for chip designers.

But with demand now waning for devices like PCs and smartphones, the increased manufacturing costs will put chip designers in a tight spot, forcing them to raise prices for products or take a hit to their profitability.

One source told Nikkei that some chip designers may balk at TSMC's increased prices for legacy nodes, though they will more likely accept the hikes for newer nodes.

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TSMC's planned price hike for 2023 is not as large as the one it enacted last year, which increased manufacturing costs for chip designers by as much as 20 percent. But that won't give them much solace, given that TSMC last year suspended its policy of cutting prices over time for clients whose products enter mass production, as Nikkei pointed out.

Samsung's reported incoming price hikes represent a significant change from last year, when it kept wafer prices relatively stable, according to Bloomberg.

The thing is, TSMC, Samsung, and other chipmakers aren't just rising prices for kicks. These companies are facing increased production costs amid several global issues, ranging from Russia's invasion of Ukraine and COVID-19 lockdowns in China to inflation and rising interest rates.

But it's not exactly promising for anyone who has been hoping for prices of various components, from GPUs to microcontrollers, to stabilize.

There has been some relief recently, with a downturn in the PC market, for instance, bringing down prices for graphics cards, but now there's a question of how long that will last. ®