The cost of consumer electronics will likely rise as Samsung raises prices for semiconductor chips. Samsung says price hikes will take effect after contracts with existing customers have been renegotiated. The company faults the rising cost of raw materials for a 15-20% cost increase for contract customers.
Samsung is the world’s second-largest manufacturer of semiconductor chips and blames the global supply shortage for the price hikes. Consumers will see higher prices for new tablets, smartphones, TVs, and other electronics starting in the second half of 2022.
The Korean technology giant shares the semiconductor chip market with the global leader Taiwan Semiconductor Manufacturing (TSM). According to economists at Zerohedge, The Taiwanese company issued its own 20% price hike late in 2021. TSM warned customers there could be an additional 5-8% increase next year,
The two companies control most of the market for semiconductor chips. According to ZeroHedge, customers will have little leverage in renegotiating their terms if they want to maintain their supply of chips.
Supply chain issues are also contributing to price increases. Economists at ZeroHedge report that the lag time between chip order placement and delivery has grown to over 26 weeks since the start of the COVID-19 pandemic.
Samsung has a long list of customers, including some of the world’s largest consumer electronics manufacturers. IBM, Qualcomm, and Nvidia are among the groups receiving Samsung semiconductors. These customers will likely raise prices for consumers to maintain profitability.
The technology leader is trying to relieve the pressure on consumers by expanding its operation. In 2021, Samsung announced a $17 billion semiconductor plant in the small town of Taylor, Texas, expected to break ground in the first half of 2022.
The announcement of price hikes comes at a time of uncertainty in the world chip market and Samsung itself. The share price of the consumer electronics manufacturer has been on a rollercoaster since January 2021.
That month, the company set a record valuation of 540 trillion won (roughly $420 billion U.S.) but has lost 25% of its value. On May 11, Samsung was valued at a little over 390 trillion won (roughly $340 billion U.S.).
Business Korea reports that market confidence in Samsung is shrinking as analysts lower their forecasts for growth in 2022 and 2023.