What you need to know
- A new report says that chip shortages are causing manufacturing prices to rise.
- Nikkei Asia says chipmakers will likely pass on prices to companies like Apple.
- It could see the company focus on more high-end products and devices.
A new report indicates that companies like Apple might have to focus on making more expensive devices in 2022, to offset the rising cost of chips due to global shortages.
Nikkei Asia reports:
The price of chips -- and the electronic devices they power -- are on track to rise into 2022 as the world's biggest contract chipmaker joins its rivals in ramping up production fees.
Prices of semiconductors have been climbing since the last quarter of 2020 amid a global supply crunch. But news that Taiwan Semiconductor Manufacturing Co. was preparing its biggest price hike in a decade still came as a shock to some, bringing home just how entrenched chip price inflation has become.
The report notes that chipmakers like Qualcomm, which will supply key components for iPhone 13, are likely to pass on rising prices to their devices makers like Apple, which in turn will look to make more high-end devices that are more expensive to compensate:
Chip developers such as Qualcomm, NXP and Nvidia, he added, will likely negotiate to pass these price increases onto their own customers -- namely device makers and electronics builders such as Apple, Samsung, Xiaomi, HP, Dell and Ford.
"[For] products like smartphones and PCs, the price increases will be more noticeable, while for other devices with limited semiconductor content you may not even notice," Hanbury said, referring to the retail prices.
The report goes on to cite one industry analyst who says that this rising cost may even impact business strategies:
"The net profit margin for smartphone makers excluding Apple is only about 5% to 10%. In that case, the rising chip costs will definitely push all the industry players to roll out higher-end handset models for next year to offset the cost impacts rather than focus on midrange or lower-end phones"
The news follows an August report stating that Apple is likely to set higher prices for iPhone 13 to compensate for increased manufacturing costs. Apple's next best iPhone might be more expensive than the iPhone 12, but this new report indicates the fever could spread to other Apple products in its lineup.
Apple is expected to unveil its new iPhone at a virtual event later this month.