There was a time when smartphone prices were getting ridiculously high, and there didn’t seem to be any stopping that trend. Market dynamics and global events like the COVID-19 pandemic, however, did at least put a pause on it or made more affordable but still capable phones more enticing to consumers. Unfortunately, another worldwide situation is causing havoc in multiple industries with rippling effects on product prices. One such unfavorable effect will be a foreseeable increase in smartphone prices next year now that TSMC, the world’s biggest semiconductor foundry, has announced its biggest price hike in a decade.
The fact that it took that long for Taiwan Semiconductor Manufacturing Co. to substantially raise its prices is almost a bit of a miracle. Then again, the foundry has big customers like Qualcomm, Apple, NVIDIA, and more on its list and already charges 20% more than its rivals. Unfortunately, things aren’t looking good for the industry as a whole, and TSMC is making its biggest price hike that will eventually affect the prices that buyers will pay in the end.
There are various factors that have lead to what some billed as a shocking announcement, including the fact that other foundries have also increased their prices. Material costs and logistics expenses have pushed these semiconductor manufacturers to raise their fees, while device makers rushing to fill their chip supplies have forced TSMC and its competitors to push their pipelines to the limit.
That is why TSMC’s price hike is also a strategy to weed out double-booking customers. These clients try to secure production space and support by placing orders for more chips than they really need, skewing figures that foundries need in order to get a better picture of market demand. With the global chip shortage, that practice has become even more prevalent as manufacturers scramble to get their devices prioritized.
Customers have until October 1 to negotiate those increased fees, and big clients like Qualcomm, Apple, and NVIDIA will most likely do so. Unfortunately, it still means that consumers should expect higher prices soon. TSMC does intend to honor existing orders at the price they were made, so those changes probably won’t be felt until next year.