TSMC's "20% Semiconductor Price Increase"... Impact on Car Prices?

Foundry Leader's Move Signals Competitors' Price Hikes
Potential Impact on Consumers in Automotive, Electronics, and Mobile Phones
Mixed Outlook in Some Sectors

[Asia Economy Reporter Kim Heung-soon] Taiwan's TSMC, the world's number one foundry (semiconductor contract manufacturing), is reportedly raising semiconductor prices supplied to customers by up to 20%, drawing attention to whether consumer prices of finished products (sets) such as automobiles, smartphones, and home appliances, which require semiconductors, will increase in the future. While there are forecasts that production costs will rise, inevitably leading to higher consumer prices, some opinions suggest that the increase may not be significant enough to be a sufficient factor for price hikes depending on the industry.

Price Increase Inevitable Due to Global Shortage

According to the industry on the 28th, following recent news of semiconductor supply price hikes from TSMC, major foundry companies including Samsung Electronics, GlobalFoundries, and SMIC both domestically and internationally are also likely to raise supply prices soon.

An industry insider said, "Since TSMC holds more than 50% of the global foundry market share, it also serves as a barometer for setting semiconductor supply prices," adding, "Other foundry companies will watch market trends after TSMC's decision to determine when and how much to raise prices."

The industry unanimously agrees that the move to raise semiconductor supply prices is an unavoidable measure due to the global supply-demand imbalance. An Ki-hyun, Executive Director of the Korea Semiconductor Industry Association, said, "Due to the global semiconductor shortage, demand for volume is overflowing, but production facilities are limited, so supply prices inevitably rise."

From the perspective of related companies, considering the characteristics of the foundry industry where building production lines requires huge investments, the current supply shortage situation is favorable for recovering invested amounts and improving performance. The profits gained can be reinvested in new or expanded facility investments to enhance competitiveness. Earlier, Samsung Electronics also stated when announcing its Q2 results last month, "We plan to accelerate growth through supply price normalization to prepare the foundation for future investments."

Finished vehicles awaiting shipment for export
[Image source=Yonhap News]

"Increased Production Cost Burden... Will Be Reflected in Consumer Prices"
"Increase Is Minimal Compared to Finished Products... Impact Not Significant"

Set manufacturers are concerned that if semiconductor supply prices rise amid prolonged supply shortages, they will face double difficulties in product production. This is expected to inevitably affect consumer prices of automobiles, smartphones, home appliances, and other products to some extent. In particular, the automobile industry, which is struggling with production difficulties due to semiconductor supply issues, is closely monitoring this. Song Seon-jae, a researcher at Hana Financial Investment, explained, "The continuous increase in demand and supply imbalance for automotive semiconductors inevitably acts as a cost increase factor for the automobile industry."

According to Hana Financial Investment, automotive semiconductors account for about 2% of automobile production costs. The current average semiconductor usage amount per vehicle is approximately $470 (about 550,000 KRW), with an average annual growth rate of about 5% from 2012 to 2020. If the price of automotive semiconductors rises uniformly by 10%, the production cost of automobile companies is estimated to increase by about 0.18%.

As mass production of electric vehicles emphasizing eco-friendliness increases, the burden on finished car manufacturers may grow further. This is because the number of electronic devices and parts requiring semiconductors increases. In fact, the semiconductor usage amount in electric vehicles is known to increase by 92% compared to internal combustion engine vehicles.

Some expect that even if semiconductor supply prices rise partially, the impact on finished product consumer prices will not be significant enough to push overall consumer prices up. An industry insider said, "Based on internal combustion engine vehicles, the price per automotive chip is generally known to be around $2," adding, "Even if semiconductor supply prices rise by 20%, the increase per vehicle is about 100,000 KRW, but considering that finished car prices are in the tens of millions of KRW, it is uncertain whether this level of increase will really influence consumer prices."

This content was produced with the assistance of AI translation services.