How Will Chip Scarcity Affect the Prices of Technological Gadgets?

Due to the pandemic conditions and the increasing demand for technological devices, all chip manufacturers are planning to increase their prices.

We mentioned that semiconductor giants such as TSMC and Samsung Foundry will soon increase in price. Counterpoint researchers say that TSMC, Samsung Foundry, GlobalFoundries, SMIC, UMC and other contract chip manufacturers will increase chip prices. Worse, it is claimed that these hikes will have a serious impact on the hardware prices that will reach the manufacturer.

These price increases include cell phones, computer hardware and a wide variety of everyday consumer technologies. Moreover, analysts say that with the expected price increases, consumers may have to turn to lower class/quality products.

It is stated that the price increases will be applied especially for chips that are mature, that is, based on older production technologies. Modern PCs and smartphones often contain chips (CPU, GPU, SoC) made using pioneering and advanced manufacturing technologies. But at the same time, dozens of logical chips made with old chip technologies are used in these products.

TSMC and other foundries are expected to raise up to 30% on some chips from 2020 to 2022 with the latest price increases. Since the profit margins of the companies are already quite low and they do not want to lose money, it is not possible for these increases to reflect directly on us.

Counterpoint says chip designers will pass their prices directly to manufacturers in 2022. Researchers also estimate that a high-end smartphone will be affected by 12% of these increases. In other words, the hikes will not be directly reflected to us, the end consumers, but still, 12% is not an underestimated rate.

In addition to factors such as efficiency and insufficient supply, high demand increases the prices of CPU, GPU and SoC produced for high-end smartphones. TSMC and Samsung Foundry have a relatively limited production capacity for their 5nm and 7nm class technologies. The price increases won’t be massive, as they have long-term relationships with companies like Apple , AMD, Qualcomm, NVIDIA, and Intel. But when it comes to maturing technologies like 10nm, 14nm or 20nm, demand exceeds supply and foundries are forced to raise their prices.

Chips made using 28nm and older process technologies are used in tens of thousands of devices and applications, including those based on chips produced with pioneering technologies. Some foundries today are operating at full capacity to meet the demand for cheap chips.

• Price increases in chips developed with maturing production technologies will naturally affect the final cost of all devices. This effect will be lower on high-end PCs and smartphones. But when it comes to mainstream devices, additional costs are inevitable and can have a serious impact on list prices. In such a case, consumers may prefer to give up the device they are considering to buy and turn to a lower class product.