Smartphone Prices Expected to Rise as TSMC Hikes Chip Production Rates

Prices of smartphones, tablets, and other electronic devices powered by semiconductors are on track to rise into 2022 as Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s biggest contract chipmaker, is raising its fees for chip production services (via Nikkei Asia).

TSMC, which controls over half the global foundry market, makes chips for the likes of Apple, Nvidia, and Qualcomm. The Taiwanese company normally commands production fees around 20% higher than its rivals, according to industry insiders.

Prices have risen in just about every step of the chip supply chain, from basic materials to chip packing and testing services. Analysts believe the impact of TSMC’s price hike will be felt more obviously from next year as the company is still working through existing orders. 

“We are all in a great shock and all of our account managers need to speak to our customers to see if we can renegotiate some of the contracts,” a chip executive told Nikkei. “We haven’t seen TSMC introduce such a broad rate increase in over a decade.”

The price of some microcontroller chips, for example, has jumped from $0.20 each to more than $1, supply chain executives and distributors told Nikkei — a 400% increase in less than a year.

Customers are likely to negotiate their own specific terms with TSMC before Oct. 1, when the price hikes officially take effect.