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Wednesday, September 28, 2022

Apple Trying To Hold The Line On Price Increases -- September 28, 2022

Link here.

From the linked story:

The report claims that Apple, the largest customer of TSMC, has rejected the supplier's plans to increase chip prices next year. TSMC has been planning to increase its prices by six to nine percent, depending on the fabrication process.

TSMC's chips were already around 20 percent more expensive compared to those from its direct rivals, but smaller foundries have ramped up their own prices in recent years due to higher material and logistics costs, and TSMC has committed to $100 billion in new investment over the next three years, motivating the company to increase its prices to maintain its premium and pass added costs on to clients.

TSMC was also reportedly keen to stop its clients from canceling orders and ordering more chips than needed in the hope of securing production line space and additional support from contract chipmakers, which has made it difficult for the company to understand real demand.

Following negotiations, Apple has apparently refused to accept further price increases. TSMC makes all of Apple's custom silicon chips, but Apple is estimated to make up more than one quarter of TSMC's entire revenue, meaning that the companies are fairly reliant upon each other. An improvement in the semiconductor industry's supply outlook despite inflation is believed to have hardened Apple's refusal to acquiesce to price hikes.

Apple probably has more "leverage" than most.

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