Samsung Tsmckimbloomberg: The sources said Samsung is in talks with foundry customers about price hikes for chips manufactured after March 2022.
Samsung Electronics Co. is planning to hike the price of chips made by its own foundry unit, which would be the company’s second increase following a 10% jump last year. The sources said Samsung is in talks with foundry customers about price hikes for chips manufactured after March 2022, a move that comes amid increasingly expensive manufacturing costs and expectations that other chipmakers will raise prices as well in coming years.
Samsung’s foundry business makes chips for clients, including Apple Inc. and Qualcomm Inc., under the contract manufacturing model. Samsung considers it more profitable to make chips for outside clients as it is heavily in debt and is trying to bring down its financial burden by cutting costs.
The company was pressured last year to raise prices by customers ahead of rival SK Hynix Inc. doing so, but Samsung resisted and decided to have a smaller hike than its competitor. The company is still deciding the size of the increase, with prices in the recent negotiations ranging from 10% to 20%, a person familiar with the matter said.
The sources declined to be named as they were not authorized to speak publicly about Samsung’s plans. The sources said that Samsung had been working with foundry clients recently on pricing issues, but did not give specifics.
Samsung said in a statement that it had been “consistently reviewing” its prices, and that it will continue to do so depending on external conditions such as the cost of materials, market demand and its clients’ requirements. The company declined to comment further.
In January, Samsung shares dipped after local media reported that the chipmaker had been considering a price increase for its foundry business in 2019. Samsung ultimately did not raise prices last year but it is expected to do so this year.
Samsung has been trying to cut costs by cutting staff and retiring older production lines. The company is also considering exiting some businesses or outsourcing manufacturing to other companies.
“Other chipmakers will likely increase prices as well,” said Kim Hyung-Suk, an analyst at Mirae Asset Daewoo Securities. “Analysts had predicted that Samsung’s price hike would be 10%, but it may end up being more than 20%.”
SK Hynix, which operates a fab in Wuxi, Jiangsu province, will reportedly hike prices for chips next year to offset costs. Taiwan Semiconductor Manufacturing Co. and United Microelectronics Corp., which are the two biggest foundries in the world, have said they will also hike prices for chips manufactured at their facilities next year.
The three companies manufacture memory chips based on NAND flash and DRAM technologies. Samsung, TSMC and UMC have been running their business models differently in the DRAM industry to lower risks, but the recent market trend has been to increasingly shift towards semi-custom chips.
Samsung has ramped up its efforts to become a semiconductor supplier in recent years. In 2015, it founded Samsung Semiconductor in China to produce memory chips and a year later it established foundry Samsung Foundry Co., Ltd. In January 2018, it acquired Murata Manufacturing Co., Ltd.