While we are accustomed to the new generation electronics just like the previous ones, the electronics segment is not protected from inflation. With recent announcements of semiconductor price hikes in 2023, consumers should move quickly to lock in lower prices this back-to-school and holiday season.
It started in June with Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest semiconductor foundry, announcing a price hike in 2023 and now falling dominoes.
TSMC’s announcement was followed by a similar announcement by Intel, and DigiTimes reported that Marvell and Qualcomm informed their customers that they would increase chip prices. It now appears that most, if not all, semiconductor companies are following along with price hikes of their own.
Price hike passed on to consumers
As a key component to everything we use in our daily lives, from electric toothbrushes and toasters to smartphones and cars, an increase in semiconductor prices will force similar increases across the value chain and ultimately those increases will be passed on to consumers. will be passed on.
Even the service charges charged by communication, internet and entertainment companies are likely to increase as they pass on the rising prices of their new equipment.
These pricing announcements are not surprising.
The semiconductor industry is grappling with capacity and supply chain constraints during the surge in demand during COVID. Previously, foundries pushed for greater investment in future capacity by their semiconductor customers or faced the consequences of losing manufacturing priority and/or higher prices.
But, with continued limitations and rising raw material prices, foundries and integrated equipment manufacturers (IDMs) such as Intel, Microchip and Micron are all facing the same problem – rising costs.
no quick fix
As Tirias Research has previously indicated, there is no easy solution to solving semiconductor supply issues. Most of the new fab capacity will be built to support new manufacturing process nodes where higher costs can be recovered through higher profit margins.
This leaves constraints on older process nodes until demand subsides as new products are introduced on advanced process nodes and additional capacity becomes available for older nodes.
With automotive, industrial, medical, and even some consumer applications using the same chips for five years, 10 years, or even longer, older process nodes and existing manufacturing capacity are past the level of manufacturing demands. Will take years
Additionally, it takes at least two years to build and commission a new semiconductor fab, even at an existing construction site. While some foundries have committed to building new fabs, much of that commitment was based on aided funding from the US and EU governments, which has been very slow to come.
As of writing this, the US has funded the CHIPS and FABS Acts, but it is unclear how those funds will be allocated and when the funds will be available to semiconductor manufacturers.
more inflationary pressure
These issues are bad enough, but when combined with continued shutdowns in China, limited mining for raw materials, bottlenecks in shipping, and labor shortages, the semiconductor industry, like all other industries, will succumb to inflationary pressures.
The only real solution to this issue is a reset in demand, which translates to an overall correction, aka bearishness, of the market. While the economy is headed for a recession, it will take time, possibly a few years, for inflation to slow down and balance prices of everything from disposable income and raw materials to consumer goods.
As a result, when it comes to electronics, the best plan for consumers is to lock in prices for this back-to-school and holiday season as higher prices will be the norm in 2023.