Electronics Will Cost More in 2023

With recent announcements of semiconductor price increases beginning in 2023, consumers should move quickly to lock in lower prices this back-to-school and holiday season, analysts have told technewsworld.com.

In June, Taiwan Semiconductor Manufacturing Company (TSMC), the largest semiconductor foundry in the world, announced price increases starting in 2023. Later so did Intel and DigiTimes reported that Marvell and Qualcomm will be increasing chip prices. Now it appears that most, if not all, semiconductor companies are going to do the same. Which all will force similar increases throughout the value chain and eventually will affect consumers. Semiconductors are used in everything electronic every day.

The service fees charged by communications, internet, and entertainment companies are likely to grow as well as they pass on the increasing prices of their new equipment.

The semiconductor industry has been struggling with capacity and supply chain constraints throughout the demand upswing during Covid. Previously, the foundries pushed for more investment by their semiconductor customers into future capacity or face the consequence of losing manufacturing priority and/or higher prices. With continued limitations and increasing prices of raw materials, the foundries and integrated device manufacturers (IDMs) like Intel, Microchip, and Micron, are all facing rising costs.

Most of the new fab capacity will be built to support newer manufacturing process nodes where the higher cost can be recouped through higher profit margins. That leaves constraints on older process nodes until demand reduces. Newer products are introduced on advanced process nodes and additional capacity for the older nodes becomes available.

Automotive, industrial, medical, and even some consumer applications use the same chips for five years, 10 years, or even longer, so it will take years before the manufacturing demands level out across the older process nodes and existing manufacturing capacity.

It takes at least two years to build and begin ramping a new semiconductor fab, even on an existing manufacturing site.

Some of the foundries have committed to building new fabs, but much of that commitment was predicated on assisted funding from the U.S. and EU governments, which has been very slow in coming, experts say.

The situation was aggravated by continued shutdowns in China, limited mining for raw materials, bottlenecks in shipping, and labor shortages. The semiconductor industry, like all other industries, will inevitably succumb to inflation.

The only real solution to the issue is a reset in demand, an overall correction of the market, a recession. While the economy is headed into a recession it will take time, possibly a few years, to reduce the rate of inflation and bring disposable income and the prices of everything from raw materials to consumer goods back into equilibrium.

As a result, when it comes to electronics, the best plan is for consumers is to lock in prices for what they need this back-to-school and holiday season because higher prices will be the norm in 2023, experts advise.