What you need to know
- The global semiconductor shortage has impacted buyers and sellers for many months.
- Chipmakers are feeling the crunch and are reportedly raising prices.
- It's unknown how long these increased prices will persist.
In today's latest semiconductor shortage news, not only is the EU gearing up to boost its chipmaking game, but a Taiwanese news outlet is reporting chipmakers are spiking prices to varying degrees. Some are said to be fronting conservative hikes while others are sending bills through the roof (via Tom's Hardware).
According to The Taipei Times and the statistics it reported on from Lu Media, "more than 30 semiconductor companies have issued price adjustment letters, with product price increases ranging from 10% to 30%." Moreover, certain IC products were cited as having price multiplications in the dozens, with those hikes threatening to bankrupt small and medium-tier enterprises dependent on said products.
"Since April, the foundry prices of companies including UMC, SMIC, Power Semiconductor Manufacturing Co., Ltd. have increased by about 10% to 30%," the report reads. It notes that TSMC, the pack leader in everything semiconductor-related, has not raised prices but has discontinued certain discount practices, which results in a net customer price increase similar to a traditional price hike.
It's specified in the report that the companies being referenced are "mainland" (i.e., the Chinese mainland), so keep its findings within context. Still, if prices are rising to the tune of 30% over there, it's only a matter of time before the economic ramifications are felt worldwide through every nation and company that deals with the affected chipmakers. The shortage is expected to last for a while longer, so how bad price increases may get remains to be seen.
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Robert Carnevale is the News Editor for Windows Central. He's a big fan of Kinect (it lives on in his heart), Sonic the Hedgehog, and the legendary intersection of those two titans, Sonic Free Riders. He is the author of Cold War 2395. Have a useful tip? Send it to firstname.lastname@example.org.
That is how supply and demand works. If demand outstrips supply, you raise prices until you reach a point where they equalize. If companies continue to invest in silicone, in a few years, there will be a glut in supply which will cause prices to go down. That process will take time, however.
Exactly. Well said
The problem is that they probably won't return the price to the previous level when supply adjusts. It will just become the new normal and we'll be paying for it forever moving forward. Just like everything else.
Companies building extra capacity will need to use it to generate money or eat the expense. CEOs don't last long if they write off big expenses shortly after making it. Just look to Leo Apotheker at HP.
JamesRyan1, while I'm sure they would like to keep prices high for better margins and profits, that's why it's called the LAW of supply and demand: if they build the added supply and if the demand drops in the future, then competition among suppliers for business will force the prices down, whether any individual company wants to or not. They will have to lower their price, or lose business to a cheaper competitor.
So if TSMC raises prices wonder if that hurts AMD sales at all?
Total sales, no.
Market share, maybe.
For the moment everybody is selling everything they can build so price is secondary to availability.
Long term, the big losses are the opportunity to sell more (and grow the installed base) and the chance it gives Intel to get tbeir house in order and catch up. The same in consoles: both are selling all they can build which limits Sony and helps XBOX catch up. And if MS yields are truly better they might ride availability to parity or even a lead on the strength of GAMEPASS and the number of studios feeding it.
This is one of the beauties of capitalism: the current shortage drives up prices, which means larger profits per unit sold, which in turn incentivizes existing manufacturers to increase capacity to grow profits and even encourages new entrants into the highly profitable market. It also spurs innovation in manufacturing methods and services to help grow capacity in the most efficient way, which yields benefits long after the current market spike passes. All of those work to increase the overall supply, which will eventually bring prices down. Governments getting involved will probably be a negative in the long run (because whenever they wade into a market, they always regulate it and NOTHING is more destructive to a market than regulations (unless you count extremes like war or natural disasters) -- they're even worse than taxes), but I do appreciate the "national security" aspect to chip production, and security is the government's responsibility.
Government involvement isn't normally good but as recently seen there are worse things when *some* governments meddle at the expense of the others. Globalism to work requires everybody to play fair. The last year has demonstrated that not everybody plays fair and, more, certain sectors require a minimum guaranteed local capacity to maintain a minimal floor for the economy and/or national security For example, vaccine production. Whether semiconductor production is, long term, as critical as vaccines, border control, energy, food, and water remains to be seen. The fate of Taiwan will tell. Short term it is, though: Hard to find consoles aren't national security issues but idled factories all over are.
Just as the 70's "oil shock" changed economies, the semiconductor crisis is bringing a new era.
Government involvement may not be good but as of now it is innevitable.
I agree with the need to respond when another government starts bending or breaking the rules to help themselves at the expense of other nations. China is the worst offender at this (other countries may be more aggressive in protecting their own industries in specific cases, like France for its wine business, but no one is as bad as China overall). I don't object to tariffs and other penalties to try to balance that out. I could also support some modest incentives to create factories and other components to assist local production. I think you and I are pretty close on this. What I don't want to see is the government actually controlling a factory or distribution (with exceptions for banning sales to enemy states -- that's appropriate as a matter of national security).
I agree on the latter, no question.
Incentivizing local production doesn't quite bother me as long as it responds to market forces. Subsidizing non-competitive tech is counterproductive, though. An example: electric vehicle subsidies to help ramp up EV production and adoption, yay.
Solar panel subsidies that went to non-competitive SOLYNDRA and China, Inc: nay. For semiconductors, fostering faster (and local) production of 2nm chips makes sense because of how foundry capacity gets repurposed over time. Today's cutting edge is tomorrow's mainstream. Most of the time, though, I'd prefer government stay out of the way and let market forces hold sway. Best example is the arrival of the next big leap in space tech: the Starship/Superheavy platform. With all the mutants it will spawn, from Single Launch Space Stations, to prebuilt moon bases, orbital refueling depots, etc. If it forces Boeing, ULA, Ariane, and the rest of old Space to get off their butts and up their tech game instead of their lobbying, so much the better.
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