With major automobile manufacturers all over the globe facing chip shortage, the Taiwan Semiconductor Manufacturing Corporation (TSMC) is looking to raise prices for the products. The report comes courtesy of The Nikkei Asian Review, with the publication's sources reporting that increases up to 15% are being considered by the foundry that has managed to establish itself as the heart of modern-day global semiconductor supplies.
TSMC's Crucial Role In Modern Era Tech Supply Chains Brought To The Forefront Following Auto Chip Shortages
At the heart of the current chip shortage is the post-pandemic economic environment which drove up the demand for consumer electronics, and owing to China's aggressive strategy in curbing down local infections, also increased the demand for automobiles in the country.
Governments including those in Germany and Japan have asked Taiwanese officials to request TSMC to step up its chip output - a difficult proposition given the complexities in setting up the production equipment needed to print the millions, if not billions of electrical circuits on a small piece of silicon.
The current glut is making TSMC and other Taiwan-based chip firms consider a second round of price hikes that could go as high as 15% reports the Review. This hike, should it go through, will follow an earlier price increase that took place in the second half of last year and ranged in between 10% to 15%. When combined with the U.S. dollar's continued depreciation following stimulus measures to ease public hardship during the pandemic, the increase will hit automakers, including Tesla Inc.'s profit margins hard.
As opposed to automobiles in the past, modern-day vehicles rely on processors for a multitude of their functions. The increase in the development of autonomous driving has further ramped up this dependence, with companies like Tesla aggressively expanding the range of data that their vehicles can gather and process to remove the burden of driving from consumers.
Price Hike Report Highlights Growing Power Of Contract Manufacturers
The shortage, combined with the near-exclusivity of Taiwan-based contract chip manufacturers in supplying global semiconductors has provided them with greater leverage in setting prices - leverage that they are now rumored to be considering to exercise. Following the increased demand for consumer electronics, the United States Department of Commerce's sanctions against Chinese telecommunications equipment provider Huawei Technologies Ltd. increased demand for semiconductors at two fronts - as TSMC and other companies' customers rushed to push more products in the market and Huawei looked to procure as many of the advanced products that it could before the sanctions came into effect.
This has left chip suppliers unable to cope with the rising demand for automobile chips that have occurred due to China's growing automobile market. Further complicating the situation is the fact that should the suppliers such as TSMC consider increasing supply, they will have to add more equipment and personnel - a process that takes months.
As opposed to the chips found inside smartphones like Apple Inc's iPhone, those used in cars are larger in size. For instance, Tesla Inc's HW 4.0 processor is reported to have a surface area of 4.5 inches square. This chip, which according to a report from China entered early-stage production last year, will be manufactured by TSMC on the 7nm process node and will not be available to consumers before next year.
In addition to the chip manufacturers, other semiconductor firms such as those responsible for preparing them to be mounted on printed circuit boards for installation into the end product are also considering price hikes reports the Review. One such firm is ASE Technology Holding, which is also responsible for packaging and is considering a 10% price rise.
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