Apple Products Could Become More Expensive as TSMC Hikes Prices

Since the last quarter of 2020, chip prices have been rising due to a host of factors, including increased global demand, a drought in Taiwan (water is an essential commodity in chip manufacturing), and pandemic-induced restrictions. These have culminated in TSMC announcing a 20 percent jump in chip prices last month. This was the most significant price hike in a decade.

TSMC caters to the lion’s share of the global foundry market. Its clients include tech giants such as Qualcomm, NVIDIA, and Apple. Thanks to its dominance and superior production quality, the company reportedly commands a 20 percent greater production fee than its rivals.

Four industry executives told Nikkei Asia that United Microelectronics, the world’s third-largest foundry by volume, has ramped up pricing, so it now charges more than its bigger compatriot. The price hike has been accelerated by device manufacturers racing since last year to secure chips before prices rise further. Interestingly, consumers don’t get hit by TSMC’s price hike immediately. This is because most device manufacturers book manufacturing slots several months before end-user devices’ manufacturing commencement.

TSMC is keen to prevent double-booking, a practice where its clients book more manufacturing slots than they need to get more chips for the going rate before they get costlier. This has reportedly made it harder for the foundry to estimate the actual demand in the market. TSMC’s price hike takes effect on October 1, and production slots booked after that date will be billed at the hiked rates. In Apple’s case, the hiked pricing is sure to affect the pricing and profit margins the company decides to maintain across products, including the iPhone range, the iPads, and Macs.

It is reasonable to speculate that Apple will be forced to hike the upcoming iPhone 13’s prices due to TSMC’s revised pricing. Yes, the chips in the launch-day devices have probably been manufactured at TSMC’s old prices. However, it would be uncharacteristic of the Cupertino-based company and detrimental to its iPhone 13 sales if the costs increase sometime after the release.

Rumor has it that Apple will be compelled to revise the pricing for the iPhone 13 from the get-go to prevent a dent in its sales in the coming months after the new iPhone breaks cover. However, the company hasn’t said anything to this effect yet, and its line of action remains to be seen.

Tell us in the comments if you think Apple will hike its pricing from iPhone 13’s debut or only when it begins selling devices impacted by TSMC’s price revision.