A new report indicates that the price of chips and devices, in general, are on track to rise into 2022 as the world’s biggest contract chipmakers are ramping up productions fees, which could end up impacting Apple and its chipmaker TSMC.
According to a Nikkei Asia report, Taiwanese semiconductor firm TSMC — the manufacturer of chipsets used by Apple, Qualcomm, and Nvidia — is set to hike its production fees by as much as 20% in 2022. The increase is reportedly due to several factors, from overwhelming demand and logistics to the race for smaller manufacturing processes. These pressures are being felt by other chipmakers, too.
The report also suggests that Qualcomm and MediaTek‘s cost of sales have ballooned by 60% and 64% between October 2020 and June 2021. This inflated cost, alongside the shortage, will likely have a knock-on effect for consumers, who may have to fork out even more for electronics. Smartphone and computer companies reliant on these chipset firm’s products will likely have to spike costs to recoup losses.
TSMC’s chips were already around 20 percent more expensive than those from its direct rivals, but smaller foundries have ramped up their own prices due to higher material and logistics costs, and TSMC has committed to $100 billion in new investment over the next three years, motivating the company to increase its prices to maintain its premium and pass these added costs on to clients.
TSMC is reportedly also keen to stop its clients from ordering more chips than needed in the hope of securing production line space and additional support from contract chipmakers, which has made it difficult for the company to understand real demand. Clients will need to negotiate specific terms for manufacturing before the price rises officially take effect from October 1.
The effect on retail prices for devices such as smartphones and computers is expected to be “noticeable.” It is speculated that consumer electronics brands will increase the retail prices of their high-end models next year to offset the impact on mid-range and entry-level devices.
It’s unclear how much rising chipset costs will impact smartphone prices or whether OEMs would be willing to take a larger hit to shield consumers.
