In a new development, Apple is reported to pay more for the chips used in multiple devices, and unfortunately, it will not cut down on its margins and pass those savings onto customers. This can mean that the upcoming iPhone 13 series could be more expensive than its predecessors, the iPhone 12 lineup.
TSMC Has Committed to a $100 Billion Investment Over the Next Three Years, and if Manufacturers Do Not Increase Prices, They Will Not Have Access to Next-Generation Technology
A report from Nikkei highlights TSMC’s plans to increase chip prices thanks to the ongoing shortage. The chip giant’s price hike could be the most substantial in a decade, and like all of its clients, Apple is not going to be protected from this change. TSMC also intends on investing $100 billion over the next three years, and that is not going to be possible if it continues to price its wafers at the current rate.
The report also states that TSMC is keen on asking clients not to place orders for more chips than they require because it will give the Taiwanese manufacturer room to secure additional production line space as well as contract additional customers. These changes dictate that TSMC’s customers will have to negotiate manufacturing terms before this price change officially takes effect on October 1.
However, the impact of this price change is expected to be felt in 2022, as TSMC continues to work through existing orders. According to a previous report, where the firm has reportedly increased wafer prices by 20 percent, it is only charging Apple an additional 3 percent, likely due to the tech behemoth’s financial capacity to secure massive orders. Apple’s orders account for 20 percent of TSMC’s revenue, and as the company prepares for its iPhone 13 event, TSMC is rumored to have prepared a 100 million A15 Bionic shipment for its biggest client.
With that kind of order, TSMC is sure to give some concession to one of its biggest clients, but not all are this fortunate. For instance, sources speaking to Nikkei said that clients like Qualcomm will be passing TSMC’s price increases onto its partners like Apple, which would force the latter to increase the pricing of products like the upcoming iPhone 13 series since these handsets feature 5G modems made by Qualcomm.
Prices are expected to stabilize once demand falls, but the question is when? We will see going into 2022.
News Source: Nikkei