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Semiconductors

TSMC hikes chip prices up to 20% amid supply shortage

Taiwanese company faces earnings pressure with plans for overseas
plants

[https]
TSMC's price hike comes on the heels of an increase of more than 10%
since last fall.   (c) Reuters
YU NAKAMURA, Nikkei staff writerAugust 26, 2021 00:30 JST | Taiwan
[                    ]CopyCopied
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TAIPEI -- Contract chipmaking giant Taiwan Semiconductor
Manufacturing Co. told clients Wednesday that it plans to raise
prices on products by as much as 20%, in what would be the company's
steepest single increase.

The price increases and the time frames for the hikes differ
depending on the client, according to reports by Taiwan's Liberty
Times newspaper and other media outlets. For some companies that
received TSMC's notice, the hikes took effect immediately.

TSMC and other Taiwanese semiconductor companies raised chip prices
by more than 10% between last fall and this spring. But with
strong demand continuing to outstrip supply, TSMC decided to sharply
increase prices again.

The increased costs tied to ramping up production are being passed
downstream, with the company enjoying better bargaining power amid
the global chip crunch as well.

This move likely will impact the sticker prices of end products. A
TSMC spokesperson declined to comment to Nikkei about the higher chip
prices.

Concerns over lower profitability are another reason behind the price
hikes. The company has said it will make $100 billion in capital
investments over three years through 2023. That commitment has fueled
qualms about a potential decline in profits as TSMC prepares to
boost its overseas expansion.

TSMC still maintained a high net profit margin of 36% during the
quarter ended in June.

At the same time, "it will be very costly to manufacture in the U.S.
and Japan," a member of the TSMC executive team said. The company is
building a cutting-edge semiconductor facility in the U.S. state of
Arizona and is considering opening its first Japanese chip plant in
Kumamoto.

Major global clients such as Toyota Motor have announced production
cutbacks due to the shortage of semiconductors. TSMC has responded by
boosting output, but the company foresees the impact lasting until
next year.

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