If the shortage was not enough, Samsung will increase the price of its chips by 20%
The shortage of chips has been one of the great concerns of the technology industry in recent years. And the picture could get complicated in the coming months not only because of the persistent lack of semiconductors —despite some optimistic views on the matter—, but also because of the price increases that are being planned. Samsung, for example, is in talks with its customers to charge them up to 20% more to manufacture its chips.
According to Bloomberg reports, this increase could come into effect from the second half of 2022. The aforementioned media indicates that the South Korean company has already negotiated this possibility with some of the companies that depend on its foundry service, although it has yet to finish closing. an agreement with several others.
If materialized, Samsung's intention would be to apply an increase of between 15 and 20% to the price of chip manufacturing under contract; percentage that would be tied to the sophistication of the components to be produced. In this way, the Asian firm would try to face the increase in logistics and material costs, boosted by a very complex international context.
It is worth mentioning that Samsung was one of the few manufacturers that supported the price of its chips made for third parties in the last year, when the industry began to suffer the most brutal effects of the shortage of semiconductors. Thus, the company now would try to compensate for what did not increase during 2021, considering that the costs of raw materials and production have increased significantly.
Samsung plans to raise prices and pressure on the semiconductor industry grows
It is estimated that key materials such as wafers, gas and chemicals have increased their prices between 20 and 30%. Add to that the impact the pandemic continues to have in China, where health lockdowns have hit the tech industry hard. During the first quarter of 2022, chip manufacturing in the Asian giant fell by 4.2%, suffering its steepest decline in March.
While the effect of the war between Russia and Ukraine is also evident. Let's not forget that up to 54% of the neon gas used globally for chip manufacturing came from two Ukrainian companies. And both stopped operating in March due to the war.
But the case of Samsung is not the only one in the industry, nor is it the most extreme. Bloomberg mentions that TSMC, the world's largest chip producer, plans to increase the price of its semiconductors between 5 and 8% in 2023; this is added to a 20% increase that it already imposed in 2021.
While United Microelectronics Corporation, one of the most recognized companies in the world in the manufacture of integrated circuits, also plans to increase its prices this year. The Taiwanese firm would have in mind to apply a rise of around 4% in the current quarter.
Regardless of the price increase that Samsung would apply to its foundry service, the prospects of the South Koreans are really positive. The Asian firm assures that it is already confirming chip orders for the next five years; the sum of the same would be equivalent to the income of 2021 multiplied by eight.
The big question is how the price increase for third-party semiconductor manufacturing will affect end users. The companies that produce smartphones, tablets, cars, video game consoles and a host of other products have already passed on the increases caused by the shortage of chips to consumers, and it is inevitable to think that this will happen again.