TSMC may raise prices as costs increase due to inflation

Top contract chip maker Taiwan Semiconductor Manufacturing Co (TSMC) said on Tuesday [27 May 2008] it may raise prices for its higher-end chips as rising costs threaten to squeeze profits. Semiconductor makers face higher costs to build state-of-the-art chip plants for most cutting-edge chips, and are also feeling the pain of rising inflation. Jason Chen, a company vice president in charge of global sales and marketing said, "We face some structural profit pressure. In the short term, we also face pressure from inflation and oil prices." Consumer prices in Taiwan, where TSMC is based, rose 3.86% in April, with core inflation up 3.1% - a nine year high.

TSMC, Samsung and Intel have said they would jointly develop next-generation bigger silicon wafers to boost efficiency in chip manufacturing. Analysts say a factory designed to make chips on 18-inch wafers could cost $10 billion or more to build, nearly triple the price of a current 12-inch wafer factory.

- Technological development is usually deflationary, and for the past decades has mostly had the upper hand over inflation. Consumers have been the primary beneficiaries, enjoying better technology at lower prices - be it computers, electronic gadgets, automotive systems, and so on. But in recent years, inflation has fought technological deflation to a standstill, and it now seems that the forces of inflation are starting to win the battle. And, contrary to the opinions expressed by the TSMC vice president, the "pressure of oil prices" will not be a short term phenomenon. When the effects of Peak Oil start to kick in, global hyperinflation will not be too far behind.

(2008-06-05 22:07:24 SGT) [Biz] Permalink

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