The price of chip manufacturing is increasing. From skyrocketing raw material prices to continual high demand for semiconductors, it/ is an expensive business right now. Semiconductor manufacturing prices are also on the rise.
Global manufacturers are announcing price hikes to combat the expected rise in inflation, passing the cost onto the customer.
Is reshoring reassuring?
Aside from the supply chain issues and raw material shortages, the drive for reshoring will drive up the cost and demand of semiconductor manufacturing equipment.
In both the US and the UK, new legislation is in the works to provide funding for the electronics industry. It comes alongside a push to reduce reliance on semiconductors sourced from Asia, especially powerhouses like Taiwan and China.
The Chips Acts
In the west’s new legislation, funding and incentives are offered to domestic and international companies looking to build fabs. One such company was TSMC itself, which was rumoured last year to be opening a branch in Germany.
While these grants and investments will go some way to covering the cost of new semiconductor manufacturing equipment, it will only be part of the massive price manufacturers pay.
A new challenger
This may not be the only international development affecting the price increases of semiconductor equipment. New competitors are throwing their proverbial hat in the semiconductor manufacturing ring. One of the countries that is beginning to manufacture more is India.
As the US and Europe are already heavy-hitters in the industry, India will have to make hefty investments into manufacturing. Bulk-buying machinery and technology for facilities will mean more demand, and distributors putting on a bigger price tag. Taiwanese manufacturer Foxconn announced it would be setting up a fab in the country.
The cost of making the semiconductor manufacturing equipment also comes into play. As companies are persuaded to move west, the cost of their manufacturing will increase. Many companies based in the east have access to cheaper labour but European and US labour costs will be higher.
Outside of Asia, in areas that are reshoring, there will also be the struggle of finding highly qualified employees. Since there was no need for skilled individuals when there were no fabs, there is a gap in the industry. It will take some time to catch up with industry standards of education.
As the chip shortages continue, there’s no guarantee when the cost increase of semiconductor manufacturing equipment might slow down. As with all things, we’ll have to wait and see.
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