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Why did Samsung Increase its Chipmaking Prices?

Chipmaking Prices
People walk past the Samsung logo displayed on a glass door at the company’s Seocho building in Seoul on April 28, 2022. (Photo by Jung Yeon-je / AFP) (Photo by JUNG YEON-JE/AFP via Getty Images)

In a piece of recent news, Samsung is reportedly raising its chipmaking prices by up to 20%. Sources clarify that Samsung is only the latest company in the industry to raise chipmaking prices.

Inflated Chipmaking Prices

Various reports state that Samsung’s chip foundry clients will soon have to pay considerably more for the company’s services. The tech giant is already in talks with its clients about charging around 15 to 20% more to manufacture their chips, depending on how sophisticated their products are. Samsung is only the latest company in the industry to raise its chipmaking prices in an effort to keep up with the growing costs of procuring materials in the midst of the global supply chain crisis.

Reportedly, companies that need chips manufactured on legacy nodes would be facing the biggest price hike, which will be applied sometime in the second half of this year. Apparently, Samsung is already done negotiating with some of its clients, but it is still currently in discussion with others. Samsung’s foundry business achieved its highest ever first quarter sales for the first three months of 2022.

Rising Global Chip Shortage

While the company is optimistic about its future, it is also expecting the global component shortage to continue having an impact on its business. Manufacturing costs are rising by up to an average of 30%, as well, which means foundry businesses have to charge more to make a profit. Rival foundries like TSMC’s already raised prices by 20% last year and will charge even more in 2023.

Seeing as Samsung has cutting-edge gear its competitors do not have and other foundries are raising prices anyway, its clients will most likely agree to pay its new prices. And since the price hike affects the whole industry, we can likely expect to pay more for cars, smartphones, consoles and other devices in the future.

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