Inflation Impacts on the Semiconductor Industry
Prices for food, fuel, housing, and other everyday items are rising thanks to inflation and supply chain instability. It goes without saying that semiconductor foundries overall are not immune to these economic impacts. Price hikes have already affected the industry while more are coming soon. Let’s look at what’s happening now and what changes we can ultimately expect by the end of 2022.
Foundry Price Hikes
To sum up, the world’s largest foundries are increasing prices because it’s becoming undeniably more expensive to fund operations. Labor, materials, and logistics have all risen in price for their growing operations. In addition, recent world events have not helped. Recent lockdowns in China, the war in Ukraine, and also the waning of 2020’s soaring demand for new home computing equipment all contribute to an unstable market. Without a doubt, this has driven foundry prices up.
Samsung, Intel, and United Microelectronics Corp have announced plans to raise prices this year. Taiwan Semiconductor Manufacturing Company (TSMC) has told clients to expect another 5-8% increase in 2023, following a hike of 20% last year. Samsung may be raising prices by as much as 20% this year.
Inflation Impacts Electronics
Inflation has been at a 40-year high since 2022, and the electronics industry is feeling it. Last year’s semiconductor shortage had a negative impact on the automotive, consumer electronics, and other semiconductor-dependent industries. Above all, high demand and low supply drove prices up for consumers and manufacturers.
However, semiconductor revenue remains steady despite inflation. As demand for consumer electronics wanes and the supply chain and foundries stabilize, prices are evening out in time, and global manufacturers are optimistic about the future. According to the World Semiconductor Trade Statistics, 2022 will be another year of double-digit growth for the worldwide market on account of unprecedented demand.
Supply Chain Stability
Although many are expressing cynicism for the industry, others are feeling optimistic. At Foxconn’s annual shareholders’ meeting, chairman Liu Young-way expressed confidence in the stability of the supply chain heading into the second half of 2022. Product development is proceeding as usual, and manufacturing facilities are operating at normal levels with closed-loop management measures. As lockdowns in China are lifted and high consumer demands ease, the supply chain is catching up, and the risk of another shortage is lessening. All in all, this sounds like good news for the industry.
To conclude, while inflation and supply chain stability continue to trouble the global economy, ensuring the quality and integrity of the components you need is consequently more critical than ever. Our extensive inspections and counterfeit detection measures mean that Velocity is your trusted supply chain partner and global electronic component distributor. As prices rise, don’t cut corners — we guarantee security from start to finish, despite any changes in the market.