Apple products could see “significant” price rises amid rising chip costs

Apple will have to pay more for chips from its devices and may result in rising costs for its customers, according to sources who speak Nikkei Asia.

TSMC, Apple’s leading chip supplier, is in the process of raising its prices following wider inflation in the industry caused by the global shortage of chip supply. The price hikes predicted by the company are said to be the largest price hikes on chips in a decade.

TSMC chips were already about 20 percent more expensive than those of its direct rivals, but smaller foundries have increased their own prices due to higher material and logistics costs, and TSMC has committed with a new investment of $ 100 billion over the next three years, which motivates the company to increase its prices to maintain its premium and pass on these added costs to customers.

According to reports, TSMC also wants to prevent its customers from ordering more chips than necessary in the hope of securing space on the production line and additional support from contract chip makers, which has made it difficult to understand real demand. for the company. Customers will have to negotiate specific terms for manufacturing before price increases officially take effect from October 1st.

The company continues to work through existing orders, which means that the impact of price increases will be felt much more sharply next year when production capacity is expanded and existing orders are exhausted. . Sources they talk to Nikkei said chip developers like Qualcomm will pass on TSMC’s price increases to device manufacturers like Apple. TSMC also supplies the A14 and M1 chips directly to Apple.

The effect on retail prices of devices such as smartphones and computers is expected to be “remarkable.” It is speculated that consumer electronics brands will increase the retail prices of their high-end models next year to offset the impact on mid-range and entry-level devices.

Chip prices are expected to remain high as customers opt for smaller manufacturing and more advanced chip production processes. Other sources said the market should be corrected once demand falls, as chip makers will have to lower prices “to attract more customers and maintain utilization rates.”

At the end of last month, DigiTimes reported that these price hikes could come sooner than expected, as the iPhone 13 range was more expensive due to rising chip costs. Still, it looks like the effect of the chip price hike won’t completely affect Apple until next year.