Electronic products are expected to become even more expensive as chip giants increase their prices

Semiconductor-based products are expected to become even more expensive as chip makers prepare to raise their prices, according to CNBC, which cites analysts.

Major companies, including Taiwan Semiconductor Manufacturing Company, Samsung and Intel, are considering further price increases, analysts told CNBC.

“Factories have already increased prices by 10-20% in the last year,” Bain semiconductor analyst Peter Hanbury told CNBC. “We expect a further round of price increases this year, but at a lower level, ie 5-7%.”

Factories are raising their prices in part because they can, but also because it is becoming increasingly expensive for them to finance their growing activities.

“The chemicals used to make the chips have increased by 10-20%,” Hanbury said. “Similarly, the work required to build new semiconductor installations has also shown shortages and increased wages.”

TSMC has warned its customers for the second time in less than a year that it plans to raise prices, Nikkei Asia said last Tuesday, citing insiders.

The company reportedly plans to increase its prices by single-digit percentage points. She cited inflation concerns, rising costs and her own expansion plans as the reason for the price increases.

A TSMC spokesman told CNBC that the company did not comment on its prices.

At the same time, competitor Samsung is going to increase chip manufacturing prices by up to 20%, according to a Bloomberg report last Friday. Samsung did not respond to a request for comment from CNBC.

“With the continuing shortage of semiconductors, manufacturers are able to charge premiums as customers continue to push to secure supply,” Hanbury said, adding that his company expects the shortage to begin to decline on some chips by end of the year.

Rise with inflation

Forrester analyst Glenn O’Donnell told CNBC that the rise in chip prices should come as no surprise to anyone in the current economic climate, adding that he expects prices to rise by 10-15%.

For the past two years, the coronavirus pandemic has contributed to the global chip shortage.

“Chipmakers are facing their own growing supply problems exacerbated by the war in Ukraine and demand remains high while supply remains limited,” O’Donnell said. “Energy prices are also on the rise, including electricity. Chip production requires a huge amount of electricity.”

Despite the growing cost of living crisis, companies incorporating chips into their products may begin to pass on the cost to consumers.

O’Donnell said he expects computers, cars, toys, consumer electronics, electrical appliances and many other products to become more expensive.

“The profit margins are already narrow in such products, so they have no choice but to raise prices,” he said.

Syed Alam, a senior Accenture executive, told CNBC that the size of any price increases would depend on the share of semiconductor costs in the total cost of the product. He added that it would also depend on manufacturers’ ability to reduce costs in other areas and on the competitive landscape of each product category.

But some sectors are beginning to see reduced demand and will find it difficult to pass on these cost increases to their customers, Hanbury said. “For example, the smartphone market has reduced demand, so they will not be able to pass on these increases so much,” he explained.