Daily Authority: Less low-end ????

It’s been coming all year. We learned on August 26th, via DigiTimes ($) reporting, that the biggest semiconductor wafer fabrication player, TSMC, was flagging a price hike in 2022 of up to 20%:

  • “TSMC has notified clients of an about 10% price hike for its sub-16nm process manufacturing, with the new prices set to be effective starting 2022, according to sources at IC design houses.”
  • Today, it’s another report adding confirmation, via Nikkei Asia: “Taiwanese semiconductor firm TSMC — the manufacturer of chipsets used by Apple, Qualcomm, and Nvidia — is set to hike its production fees by as much as 20% in 2022. The increase is reportedly due to several factors, from overwhelming demand and logistics to the race for smaller manufacturing processes. These pressures are being felt by other chipmakers, too.”
  • Funnily enough, part of the decision by TSMC might be to avoid “double-booking,” where crafty chip clients “place orders for more chips than they actually need in hopes of securing production line space and support from contract chipmakers.”
  • When that happens, uncertainty about actual demand develops, so there are reports it is being stamped out by just making it expensive to book fab space.
  • Also: “The report also suggests that Qualcomm and MediaTek‘s cost of sales have ballooned by 60% and 64% between October 2020 and June 2021. This inflated cost, alongside the shortage, will likely have a knock-on effect for consumers, who may have to fork out even more for electronics.”

What that means:

  • Dale Gai, research director of Counterpoint Research, told TheNikkei the following: “The net profit margin for smartphone makers excluding Apple is only about 5% to 10%. In that case, the rising chip costs will definitely push all the industry players to roll out higher-end handset models for next year to offset the cost impacts rather than focus on midrange or lower-end phones.”
  • So, with higher costs in the absolute cut-throat world of mid-range and low-end devices, smartphone makers may turn to higher-spec devices where more margin is available. 
  • And that might hurt consumers of low-end devices.
  • So, if it’s not shortages creating delays, it’s forcing decisions around the profitability of handset series.
  • Once again the message seems to be: if you want something now, and you don’t like to take chances, you might need to get in soon…
  • That said, at some point, there may be an oversupply as demand finds a normal? Maybe?

Related Posts