Bad news if you’re planning to buy an electronic product in the coming months: prices will skyrocket. We predicted this situation a few months ago (late May 2022), after releasing information from Bloomberg. According to the media, Samsung and TSMC, the world’s two largest manufacturers of electronic chips, were preparing to raise the prices of their components.
In the first place, Samsung would raise prices for its semiconductors by 15 to 20% Bloomberg explained. The reasons for this increase are diverse and also occur in other sectors. In addition to the war in Ukraine, there is a rise in the prices of raw materials and freight, the shortage of components, the incarcerations in China and the explosion in demand.
Samsung is not alone in making this adjustment. The world leader in semiconductors TSMC announced that Nikkei Asia will also increase the prices of its chips in early 2023. At the Chinese giant, the increase is less brutal, about 5 to 8%. But less than a year ago, it already made its first significant increase (20%).
Automotive and high-tech: an inevitable price increase?
In a semiconductor market of USD 580 billion (2021 figures, a record), such an increase will not be without consequences for the end customer. TSMC has already announced that it would invest $40-44 billion to raise its rate. This investment must be recouped.
The industrialists in the sector also lack the means to put pressure on the two founders, TSMC and Samsung, for the good and simple reason that they have unique know-how. If there is no competition, difficult to negotiate.
And it is not Intel, which has just changed its strategy, that will change the situation for the time being. The American has yet to set up the infrastructure to produce its semiconductors. A factory is not built in a day. The process is even longer with the shortage of components needed to manufacture the machine tools.
According to Bloomberg, the car market is the main market that will bear the brunt of this increase. Already hard hit, the sector will have to bite its teeth. But for how long? If Tesla has found a solution by raising its prices (fewer units but more expensive), the increase will have to stop before reaching the point of no return where no one can buy anymore. Because inflation also and especially affects consumers.
The situation is also likely to become tense across the consumer electronics market. The processors needed to make smartphones, tablets and PCs are produced by Samsung and TSMC. In this sector, however, the units are counted in the hundreds of millions. TSMC is also Apple’s main supplier. I’m not sure if a 15-20% higher price for the release of its iPhone 14 (next October) will appeal to consumers. Unless manufacturers absorb the increase by cutting back on their margins. There is no age to believe in Santa Claus.
PS5, iPhone 14 Pro, graphics cards, TV: prices are already rising
While inflation in France reached 5.2% last May (according to INSEE figures), forecasts for the end of the year and early 2023 are close to 10%. So, to pay for a tech product, it will make more than sense to put your hand in the wallet. Smartphones that were just above 1,000 euros will now peak around 1,500 euros. Sony has already announced a price increase for its PS5 in France (50 euros or +10%).
Graphics cards, cars, PCs, tablets, TVs, all technical products will be marketed at higher prices. Although some brands have chosen to (temporarily) absorb inflation, most pass this on to the final price. So the iPhone 14 Pro should display an unprecedented price. This situation will be all the more complicated in France, as the euro/dollar exchange rate is against us.
What to expect? For manufacturers who have chosen to absorb inflation, the situation may be favorable. Wages do not change one iota, consumers will refocus their purchases on essential needs (food, housing, fuel, energy). As for technical products, the models with the best value for money should continue to work. Provided inflation is not passed on. But that is an other story.
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