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Daily Digest | When the chips are down, prices soar

Written by The Uptake Published on   2 mins read

Chipmakers are hiking prices.

Hi there. It’s AJ.

The global chip shortage continues to wreak havoc on the tech industry—no news there. Now, chipmakers are raising their prices because their costs are ticking up. Chinese automaker BYD said it will charge an extra 5% starting July 1, while major producers like UMC and TSMC are expected to hike prices by as much as 30% by the third quarter of 2021.

There is relentless demand for integrated circuits, and major producers are racing to boost production capacity. China’s domestic chip champion SMIC is one firm looking to soak up excess demand. It plans to open a new production plant in Shenzhen by 2022 to churn out 40,000 wafers a month. And global leader TSMC said in April that it will spend USD 100 billion through 2023 to meet the “structural and fundamental increase” in global chip demand, with new fabs set to open in Tokyo and Nanjing.

In the desperate pursuit to fill the supply gap, many investors have speculated on risky semiconductor projects that are unqualified and end up in failure. One egregious example was the case of HSMC, where a con artist posing as a chip company executive scammed more than RMB 8 billion (USD 1.2 billion) from the Wuhan government. HSMC wasn’t an outlier. Other Chinese investors, both public and private, have been blinded by the hot market and backed bad deals in recent months.

The shortage has prompted some automakers to consider revamping their supply chains in favor of stockpiling chips, but semiconductors have a shelf life and are easily contaminated, leaving many companies between a rock and a hard place.

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