Intel has announced plans to raise its prices for chips amid a supply chain crisis
Intel has been raising prices on a broad range of microprocessors due to a supply chain crisis in the tough global economic environment.
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According to Nikkei Asia, the company told customers that it would raise prices on most of its microprocessor and peripheral chips later this year, citing increasing costs.
Intel has not yet decided whether to increase its prices for its flagship products including CPUs for servers and computers.
The hike will also feature products like chips for Wi-FI and other connectivity options.
According to Intel CEO Pat Gelsinger, the semiconductor industry will experience shortages until 2024.
Gelsinger explained why the issue may drag on for a long time due to a lack of critical manufacturing components.
“In the supply chains, lockdowns in Shanghai, and the war in Ukraine, have shown more than ever that the global economy needs more resilient and more geographically balanced semiconductor manufacturing.”
The chip shortage cost U.S. companies $240 billion last year, according to a new report from the National Association of Manufacturers
“We expect the semiconductor industry to continue to see challenges until 2024 in areas like foundries and tool availability.”
According to Counterpoint Research, global semiconductor chip shortages are expected to ease during the second half of 2022 as supply-demand gaps shrink across most components.
Intel computing chip on an old motherboard
Intel plans price hikes for a wide range of its products
Intel has informed customers that it will raise prices on most of its microprocessor and peripheral chips later this year, citing increasing costs.
The largest U.S. chip maker plans to increase prices on its flagship products such as central processors for servers and computers, as well as on other items, including chips used in Wi-Fi and other networking equipment, according to three industry insiders with direct knowledge of the plan.
Intel says the price increases are needed because of the soaring costs for production and materials. The percentage increases have yet to be finalized and could be higher or lower for different types of chips. But they’re likely to range from a small single-digit increase to at least 10% and up to 20%.
A worker works at the Intel Assembly and Test Factory
Intel’s move comes amidst an inflation surge in the US and around the world. Consumer prices rose 9.1 percent in June, a 40-year high.
But while rising costs for commodities, materials, shipping, and labor have all piled pressure on the chip industry and inflation has made pricing decisions particularly fraught, the outlook for consumer spending has also been clouded by inflation.
Demand for smartphones, computers, televisions, and game consoles weakened earlier in the year, and manufacturers have indicated that inventories are growing. Samsung Electronics has ordered suppliers of some of its products to stop producing them.
Many of Intel’s main PC clients, such as Asus and Acer, have publicly warned of an upcoming downturn. Acer Chairman Jason Chen told reporters on Wednesday that his company is no longer suffering a chip shortage. Some of the chip suppliers’ CEOs even called him recently to buy more chips. The situation has changed.
Intel warned of weakening global demand for its products in its last earnings conference and has reiterated the gloomy economic outlook at subsequent events.
On the same earnings call, executives from Intel hinted at price rises to be coming. CEO Pat Gelsinger said the company would “mix up the products to higher price levels.” CFO Dave Zimmer says it’s “looking for targeted price hikes in certain segments.”
On its first-quarter earnings call, Intel stated that it would raise prices in certain segments of its operations due to rising inflationary pressures. “The company has begun informing its customers of these changes.”
Intel’s Asian rival TSMC has told clients it will hike prices by a single-digit percentage starting next year, Nikkei Asia Business Daily reported, less than a month after its largest price increase since 2010.
China’s Semiconductors Manufacturing International Corp., a small chipmaker, also told analysts that it will raise its prices because otherwise, the increased production costs will erode its gross margins by 10%.
Chip material suppliers such as Shin-Etsu Chemical, Sumco, and Showa Denko have all told their clients that they will raise prices by at least 20% next year. Doris Hsu has confirmed that her company, GlobalWafers, is increasing its prices for chipmaking customers, which means that they’re going to be paying more for their chips.
Frequently Asked Questions
- Why are we facing chip shortages?
There are so many reasons why it’s difficult to know where to begin, but the biggest problem lies in the fact that semiconductor manufacturing has been unable to develop a stable economic model that could be relied upon for the longer term.
So, in this article I have talked about the crisis of chip shortages and what will intel do, if you liked this article, let us know in the comments. If you want to get more awesome buying guides and best buying lists, then please sign up for our newsletter.
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