TSMC Increases Chipset Prices, IPhone 13 Is Not Selling Cheap

The iPhone 13 product is predicted not to be sold cheaply. (photo: The Registi / Unsplash)

JAKARTA - The increase in smartphone prices during the COVID-19 pandemic is bad news. However, it will still happen. The reason is, Taiwan Semiconductor Manufacturing Co. (TSMC) some time ago reported that it would increase the price of its chipset.

Of course this will have an impact on sales of smartphones that use chipsets from TSMC such as Apple. Apple is currently trying to reach a wider range of consumers by bringing mobile phones more affordable.

With the iPhone SE and its successors, Apple is giving customers a budget option without sacrificing a lot of performance. The company is also bringing the Mini model in the iPhone 12 series as a cheaper option.

While the iPhone 12 Mini isn't in great demand, it shows Apple's commitment to expanding its reach by offering cheaper versions of its products. However, an increase in chip costs may force Apple to increase the price of smartphones in the future.

Nikkei Asia reported, Tuesday, September 7, TSMC intends to increase prices by 20 percent, and this will be TSMC's most drastic price increase in 10 years.

"These higher prices stem from a variety of factors, including higher material and logistics costs and the race by device makers to secure adequate chip supplies, which have emerged since chip shortages first started to bite late last year," TSMC said.

TSMC is not without reason to increase the price. It is claimed that this price increase is also said to be a step to stop the practice of double ordering.

Double ordering is when a client orders more chips than they actually need. This is done to secure additional production line space and support from chipmakers.

Counterpoint Research says that rising chip costs could even impact smartphone makers' business strategies.

“Net profit margins for smartphone makers outside of Apple are only around 5 percent to 10 percent. In this case, the increase in chip costs will definitely encourage all industry players to launch high-end handset models for next year to offset the cost impact rather than focusing on mid-range or low-end phones," said Counterpoint Research researcher as quoted by 9to5Mac.

Last month, a report from DigiTimes also indicated that Apple would face bigger bills from TSMC for its A-series and M-series chips. TSMC is poised to increase its offerings including for sub-7nm process technology, which will result in more manufacturing costs facing Apple and other large clients.

However, Apple has less bargaining power when it comes to a single supplier. TSMC is the company's sole supplier of the A-series and M-series chips used in the new iPhones, iPads, and Macs.

With the new iPhone 13 and smartwatch to be announced in the coming weeks, we'll just have to wait a little longer to find out how much the TSMC price hike will impact Apple and its products.