The recent market news is quite confusing. On the one hand, the prices of many kinds of chips have plummeted, and inventories have risen rapidly; On the other hand, big manufacturers such as Intel and TSMC have indicated price increases.
According to foreign media, affected by global inflation and cost increases, Intel has informed customers that it will raise the prices of a number of core servers, computer CPU processors and peripheral chips in the second half of 2022. It is reported that the increase rate of different types of chips may be different, and in some cases, the increase rate is more than 10%, or even more than 20%; TSMC said at the end of June that it had informed customers that it would increase the price by single digits from 2023, increasing the OEM price of most processes by about 6%.
Intel and TSMC have no choice but to raise prices this time. It is reported that the supply of semiconductor upstream equipment and materials is becoming increasingly tight due to the soaring enthusiasm of global chip factories to expand production, which also brings some pressure on manufacturers to increase costs.
The delivery date of equipment has been continuously extended, and the cost of chip components has risen rapidly
In terms of equipment, due to the large demand for global production expansion, equipment has been in short supply. According to trendforce Jibang consulting in late June, the delivery date of semiconductor equipment is facing the dilemma of extending to 18-30 months.
At present, the problem of equipment lacking core and parts is more serious, and the price of some chip parts that are in short supply is also rising. According to the industry news in May this year, driven by the scarcity of goods, relevant suppliers such as rufa semiconductor, Infineon, NXP and Renesas increased the chip price in the second quarter of this year.
In addition, the failure to deliver the equipment on time has also caused a series of chain reactions. For example, some companies have to pay more site and labor costs due to the rising inventory of semi-finished products.
The price of semiconductor materials has increased significantly, and the reaction of silicon wafers is more intense
In terms of materials, from this year's market end, the price of semiconductor materials silicon wafer, photoresist, rare gas and other products has a clear trend of increase. Among them, the price of silicon chips has increased significantly. Since the beginning of this year, leading manufacturers such as Xinyue chemical, Shenggao and global crystal have announced price increases one after another.
In March this year, Xinyue chemical announced on its official website that the sales price of all silicon products of the company would be increased by 10% ~ 20% from April. In May, Xinyue chemical announced again that the price of all silicone products shipped would be increased by 10%.
According to foreign media, Sunco plans to increase the price of its long-term contract with chip manufacturers by about 30% between 2022 and 2024. Shenggao believes that the rising trend of semiconductor silicon chips will last at least until 2024.
In terms of global crystal, Xu Xiulan, chairman, disclosed that the price of the company's latest long-term contract is higher than that one or two months ago. The price of long-term contract continues to rise, and it is expected that next year and the year after will also be higher than this year. There is almost no spot quantity to supply in the next few years. Some long-term contracts signed by the company and customers have exceeded 2028 and reached 2031.
In addition, recently, Showa denko K.K., a leading semiconductor material company, said to the outside world that it would further raise prices and cut unprofitable product lines to meet a series of challenges faced by the semiconductor industry. It is reported that Showa Electric is a key chip material supplier of many semiconductor companies such as TSMC and Infineon. Its decision to announce a price increase has drawn attention to the supply and demand situation of the semiconductor material market.
Behind the price increase are two dilemmas
Public information shows that Intel's price rise has long been announced. As early as at an earnings conference in April this year, Intel warned that market demand was weakening, and reiterated in subsequent activities that the macroeconomic outlook was pessimistic. With hints that prices will rise.
With regard to the current weakness of the global consumer electronics market, Intel CEO pat Gelsinger said that the company would "reposition its products to a higher price". Chief financial officer Dave Zimmer said that the company is "seeking targeted price increases in certain areas". The industry interprets that Intel may focus on raising prices in the field of advantageous chips rather than universal products.
TSMC is more confident about this price increase. It recently announced its 2022q2 financial results. Among them, TSMC's revenue increased by 36.6% year-on-year to 18.16 billion US dollars (534.14 billion new Taiwan dollars). It is worth noting that its gross profit margin still increased by 9.1 percentage points to 59.1% compared with the same period of the previous year when the cost rose sharply. This may explain why TSMC has increased its price.
It is reported that TSMC is the leading enterprise in the field of contract manufacturing, and Intel is the leader in the field of processors. The market shares of both are very high, so they dare to raise prices in the current volatile market environment. But for other manufacturers, there is no such confidence. At present, inflation is serious, and many chip inventories are severely squeezed. Such measures are hardly considered.
At present, the industrial chain reflects that the upstream equipment and material manufacturers in the chip market have a greater say in the chip market. If the upstream supply is tight and prices continue to rise, the profit space of downstream manufacturers will continue to be squeezed. In the current inflation trend, the situation is not optimistic.