The biggest US chipmaker plans to raise prices this autumn on flagship products such as central processing units for servers and computers, where it dominates the market, as well as on a wide range of other items, including chips for Wi-Fi and other connectivity, according to three industry executives with direct knowledge.
Intel says the price hikes are required because of the surging costs for production and materials, the executives said.
The percentage increases have not been finalised, and could be different for different types of chips, but are likely to range from a minimal single-digit increase to more than 10% and 20% in some cases, one of the people said.
Intel’s move comes amid an inflation surge in the US and around the world. The US reported consumer prices rose 9.1% in June, a 40-year record.
But while rising costs of commodities, materials, shipping and labour have all heaped pressure on the chip industry, inflation has also clouded the outlook for consumer spending, making pricing decisions particularly fraught.
Demand for smartphones, PCs, TVs and game consoles weakened earlier this year, and device makers have indicated that inventories of unsold items are mounting. Samsung Electronics has told suppliers of a range of its products to halt shipments.
Many of Intel’s key PC clients, such as Acer and Asustek Computer, have publicly warned of a downturn. Acer Chairman Jason Chen on Wednesday told reporters that his company is no longer suffering a chip shortage. “Some of the chip suppliers’ CEOs even called me recently to buy more chips from them,” he said. “The situation has changed.”
Intel warned of weakening demand in its last earnings conference in April and has reiterated the gloomy macroeconomic outlook at subsequent events.
In the same earnings call, Intel executives hinted at price rises to come. CEO Pat Gelsinger said the company would “remix the products to higher price points”. CFO Dave Zimmer said it was “looking for targeted price increases in certain segments”.
In a statement to Nikkei Asia on Thursday, the company said, “On its Q1 earnings call, Intel indicated it would increase pricing in certain segments of its business due to inflationary pressures. The company has begun to inform customers of these changes.”
Intel’s Asian peer Taiwan Semiconductor Manufacturing Co – the world’s biggest contract chipmaker – has told clients it will raise prices by a “single-digit” percentage starting in 2023, Nikkei Asia first reported, less than a year after its largest price increase in a decade.
China’s Semiconductor Manufacturing International Corp, a smaller chipmaker, also told investors that it will reflect rising costs of materials by raising its prices since otherwise, the increased production costs would erode its gross margin by 10%.
Suppliers of chip materials such as Shin-Etsu Chemical, Sumco and Showa Denko have all told clients they will increase prices by at least 20%. Doris Hsu, CEO of GlobalWafers, the world’s No 3 wafer material maker, also recently confirmed it was raising prices for chipmaking customers.