Apple Products May See “Sensitive” Price Hikes Amid Rising Chip Costs

Apple will have to pay more for the chips in its devices and could pass the higher costs on to its customers, according to sources speaking to Nikkei Asia.

TSMC, Apple’s main chip supplier, is raising prices following broader inflation in the industry caused by the global chip shortage. The company’s projected price hikes would be the biggest chip price hikes in a decade.

TSMC’s chips were already around 20% more expensive than those of its direct competitors, but small foundries raised their own prices due to higher material and logistics costs, and TSMC pledged to invest $ 100 billion. dollars over the next three years, motivating the company to increase its prices to maintain its premium and pass these additional costs on to customers.

TSMC is also said to be keen to prevent its customers from ordering more chips than necessary in the hopes of securing production line space and additional support from contract chipmakers, which has made it difficult for the company. to understand the real demand. Customers will need to negotiate specific manufacturing terms before the price increases officially take effect from October 1.

The company is still working on existing orders, which means the impact of price increases will be felt much harder next year when production capacity increases and existing orders are filled. Sources that speak Nikkei said chip developers like Qualcomm would pass TSMC’s price increases on to device makers like Apple. TSMC also supplies the A14 and M1 chips directly to Apple.

The effect on the retail prices of devices such as smartphones and computers is expected to be ‘noticeable’. It is assumed 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 demand smaller manufacturing and more advanced chip production processes. Other sources said the market is expected to correct once demand drops, as chipmakers 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 hit sooner than expected, with the iPhone 13 line being more expensive due to rising chip costs. Even so, it looks like the effect of rising chip prices won’t fully affect Apple until next year.