Recently TSMC declared its plans to increase chip pricing by 5-9% in 2023. Now, Samsung Foundry also seems to join the price hike bandwagon, according to a report. This price hike is not a complete surprise as semiconductor manufacturers are witnessing an unprecedented surge in demands for chips.
Samsung Foundry might settle for an almost 15% to 20% price hike. The hike is likely to happen around the third or fourth quarter of this year. It will take some time for the hike to reflect on retail products. But, the price hike percentage will vary depending on the chip in question. Chips made on older manufacturing processes will see a larger hike than those made on advanced newer process nodes like 5nm, etc.
According to the Bloomberg report, several Samsung Foundry customers have already accepted the increase in price tariffs.
Samsung Foundries is one of the last companies to increase the pricing of their chips. Before Samsung, most of the major semiconductor manufacturers like GlobalFoundries, UMC, SMIC, and TSMC had increased pricing in 2021 when global demand skyrocketed. Samsung was the only company that maintained a stable pricing policy throughout the global chip shortage.
Currently, Samsung’s labs are functioning at or higher than 100% usage all the time. This increases the chances of machines going kaput as they are hardly getting any downtime. Also, continuous usage decreases the lifespans of the machines used by Samsung Foundry. All of this accrues to higher maintenance costs. Thus, the company had no option other than increasing its pricing to fund its current high usage state.
Other factors contributing to this price hike include the post-pandemic economic inflation, the war in Ukraine, and other minor factors like rising labor costs, and interest rates.
This overall increase in chip pricing might become to the electronics market in the upcoming few years. As newer technologies like 5G and VR start to take over the market, demand is only going to increase. Thus, companies will have to either choose between selling fewer devices or increasing the pricing of their products. And, among these, the latter seems more sensible to any corporation but will probably not be welcome by the consumer tech market and media.