TSMC has increased the cost of chip production

TSMC, one of the largest semiconductor component companies, has reportedly changed the way it contracts with its trading partners. TSMC originally offered surprising discounts to attract large customers to beat its competitors; But recent reports indicate that almost all of the discounts have been lifted and that the cost of mass-producing chips has increased.

This is happening while TSMC has entered into large contracts and the Taiwanese company’s customers have placed numerous orders. However, this is not just the case with TSMC, and other semiconductor companies have taken similar steps, increasing the cost of mass-producing chips.

Currently, the demand for a variety of desktop and portable personal computers, smartphones, tablets, smartwatches, portable home consoles and even smart TVs has not only declined; Rather, it has reportedly increased dramatically in some cases. For example, Apple has increased the production of its smartphones for 2021 by 20 to 30%, and there is a possibility that this amount will increase.

The common denominator of all that has been said is that they have chips along with other components, and in fact, as the demand for these devices increases, so will the production of the required components, including chips. However, excessive demand for a product not only reduces its price; Rather, it can backfire.

In fact, demand for a product causes different companies to enter the field of production and compete with each other to reduce prices and attract more customers; But demand that exceeds the production capacity of companies leads to a lack of resources and parts needed to produce the product in question. In such a situation, the manufacturing companies are forced to spend more to provide the necessary parts and equipment and, as a result, increase the final price of their services.

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When we talk about chips, we are talking more about the technology of making them. At present, leading companies are competing with each other to produce chips with five and seven nanometer lithography to offer their customers the best performance and computing power while consuming low power; But every SoC needs other components to make the product functional.

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Each chip is accompanied by various components such as power control IC, input and output device controller, etc., and in the absence of any of them, the device in question, such as a smartphone or tablet, can not work. When companies complain about the lack of parts to produce their products, they do not just refer to chips; Instead, each of the chip’s components may be defective.

Meanwhile, the most important customers of TSMC are companies that use the most advanced production processes, ie five and seven nanometers, to produce their products, and TSMC has a slight discount (maximum 3%) to attract such customers who order 300 mm wafers; But this discount will be removed after 2021 for the reasons mentioned. However, it is unclear whether all TSMC services will be discounted or only available for high-demand services.

Demand for mid-range and low-end chips for 200mm wafers has been so high that companies such as UMC have been forced to raise costs to provide services, according to reports in recent months. This has been confirmed by UMC leaders in interviews with the media. Unlike Samsung and TSMC, UMC does not have the facilities to produce advanced chips.

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Currently, only TSMC and Samsung can make chips with lithography production process of five, six and seven nanometers. This has forced the customers of the two companies to accept new prices; Because it is not possible to replace TSMC or Samsung with another company. Meanwhile, some analysts believe that increasing the production price of chips can affect the price of various products; But it is not yet clear how much the price of the products will increase.

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