Understanding Deep Politics

Taiwan Semiconductor Is Hiking Chip Prices Up To 20%

Taiwan Semiconductor Is Hiking Chip Prices Up To 20%

Here comes even more inflation…

Just days after we wrote about how Taiwan Semiconductor was the centerpiece at the middle of the global semiconductor shortage, the company has said they are going to be raising prices by up to 20% next year. The report comes via Chinese media and crossed the wire early on Thursday morning.

Earlier this year we reported that semi prices were expected to rise through all of 2021, but recent reports have suggested that production was picking up again. In fact, car chip vendors are now able to “ramp up output” thanks to more foundry house support coming online, Digitimes Asia reported this week.

But that isn’t stopping TSMC from hiking prices, as was telegraphed earlier this year. For example, back in April, suppliers like Japan’s top silicone producer, Shin-Etsu Chemical Co. Ltd. marked up prices between 10% and 20%, according to Caixin, who reported that growing input costs and supply disruptions could be tide that continues to push up prices. Shin-Etsu blamed their price hikes on the rising cost of silicon metal, which they said was a result of demand out of China

Names like Semiconductor Manufacturing International Corp. (SMIC), United Microelectronics Corp., and Powerchip Semiconductor Manufacturing Corp. had all announced intentions to raise prices in similar fashion. Taiwan Semiconductor Manufacturing Co. Ltd. has also said prices are coming in the form of suspending wafer price reductions beginning December 31 this year. 

One Jiangsu diode manufacturer said it’s suppliers had raised prices five times since the second half of 2020. The hikes represented a total markup of between 30% and 40%, including a new 10% hike that came into effect last week. The same firm’s inventory was at “half their normal level”, Caixin reported.

One semiconductor salesman said: “The whole industry is scrambling for (chips), and it’s hard for us to make a purchase.”

We called TSMC the “one chipmaker the entire world is depending on” in a piece we published earlier this week that highlighted the world’s reliance on their production.

Not only has TSMC made headlines for proposing to expand production into the United States, as we have documented numerous times, but now it is making headlines for how it has become the center of the semiconductor world – and how that can leave the world vulnerable. 

TSMC’s chips are in “billion of products”, including iPhones, computers and cars, the Wall Street Journal writes in a new profile of the company. The company has slowly become the world’s 11th most valuable company, with a market cap of about $550 billion. The company reported $17.6 billion in profits last year on revenues of about $45.5 billion. TSMC makes “around 92% of the world’s most sophisticated chips,” the report says. 

This has led to the U.S., Europe and China looking to cut their reliance on chips out of the Taiwanese company. But that’s a tough task given its contribution globally. The U.S., for example, only accounts for 12% of the world’s chip manufacturing, down from 37% in 1990. 

Analysts aren’t confident of there being a more diversified semiconductor supply chain “anytime soon”. They attribute this to TSMC’s “hard driving culture” and “deep pockets”. The industry has become so complex that once one producer falls behind, it becomes tough to catch up. 

But hey, we’re sure the price hikes will just be transitory, right Jerome?

Tyler Durden
Thu, 06/24/2021 – 12:30

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