Semiconductor Prices Up 20%... TSMC Sparks Foundry Industry-wide Price Hikes Predicted

Samsung Electronics Mentions Plan for Realistic Supply Prices
Automotive Industry Expresses Concerns Over Production Cost Burden

[Asia Economy Reporters Changhwan Lee, Heungsun Kim] Taiwan's TSMC, the world's No. 1 foundry (semiconductor contract manufacturing), has decided to raise semiconductor prices supplied to customers by up to 20%, prompting domestic and international foundry companies such as Samsung Electronics, DB HiTek, and UMC to enter a game of nerves. Meanwhile, manufacturers of finished products (sets) that require semiconductors, such as automobiles, smartphones, and home appliances, inevitably face increased production cost burdens, leading them to closely monitor the foundry industry's trends and actively prepare countermeasures.

According to the industry on the 27th, following the news of semiconductor supply price hikes initiated by TSMC, major foundry companies including Samsung Electronics are carefully observing market trends and reviewing response strategies. Ki-Hyun Ahn, Executive Director of the Korea Semiconductor Industry Association, said, "Due to the global semiconductor shortage, demand is overflowing, but production facilities are limited, so supply prices inevitably rise," adding, "With TSMC, the market share leader, raising prices, other foundry companies are also contemplating when and how much to increase their prices."

The semiconductor industry views this as the right time for foundry companies, which have invested heavily in facilities, to receive fair prices and begin substantial profit improvements. The supply-demand imbalance is unlikely to be resolved in the short term, and leading companies like TSMC and Samsung Electronics need to invest tens of trillions of won again to expand production lines, which will take time to complete. Earlier, Samsung Electronics announced its Q2 earnings last month, stating, "We plan to accelerate growth through supply price normalization to establish a foundation for future investments." Taiwanese semiconductor companies have already raised supply prices by about 10% from last fall to this spring, but since supply still cannot meet demand, further price increases are expected.

While the price increase is generally seen as beneficial for foundry companies, set manufacturers are concerned about the double burden of semiconductor supply shortages and rising costs. The automotive industry, in particular, which is struggling with semiconductor supply issues, is closely monitoring the situation. According to Hana Financial Investment, semiconductors currently account for about 2% of automobile production costs. The average semiconductor cost per vehicle is approximately $470, with an annual growth rate of about 5% from 2012 to 2020. If vehicle semiconductor prices uniformly increase by 10%, automobile production costs are estimated to rise by about 0.18%.

With the recent increase in electric vehicle sales, the burden on automakers is expected to grow further. It is known that semiconductor costs for electric vehicles increase by 92% compared to internal combustion engine vehicles. An industry insider said, "It is unlikely that manufacturers of automobiles, smartphones, or home appliances will fully absorb the cost increases caused by semiconductor price hikes," predicting, "Ultimately, a portion of these costs will be reflected in product prices, pushing up consumer prices."