"This Is Not A Temporary Situation": The Global Chip Shortage Will Continue To Push Prices Higher

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by Tyler Durden
Monday, Jun 21, 2021 - 07:20 PM

The ongoing global semiconductor shortage is causing prices of electronics to rise while at the same time pressuring suppliers and material providers to continue raising prices. In the midst of the shortage, demand for consumer electronics has continued to rocket higher. 

Ergo, industry officials believe that the increases are likely to continue, according to a new Wall Street Journal report. The effects can be easily seen in consumer electronics. 

The report notes that items like one ASUS laptop that formerly cost $900 now costs $950. An HP Chromebook laptop that used to cost $220 has seen its price rise to $250. In fact, HP has raised consumer PC prices by 8% and printer prices by more than 20% in just the short span of a year. the company's CEO blames the rise in prices on "component shortages".

Dell Technologies Inc. Chief Financial Officer Thomas Sweet recently said: “As we think about component cost increases, we’ll adjust our pricing as appropriate.”

Bernstein analyst Toni Sacconaghi made excuses for HP explained the price hikes by saying they reflected an absence of usual discounts, instead of all-out price increases. 

Vincent Roche, the CEO of chip maker Analog Devices Inc., commented: “We’re not taking advantage of this cycle to do anything on pricing, other than where we are paying more for the additional supply that we’ve got to get on board. We’re passing that on.”

Hock Tan, CEO of Broadcom Inc., simply noted: “We see cost inflation.”

Digi-Key Electronics has also raised prices of semiconductor-related components by roughly 15% this year. They blame it on "pressures from the supply crunch". Certain components now cost 40% more than they used to, according to David Stein, the company’s vice president of global supplier management.

"Contract prices for computer memory have risen about 34% since the beginning of last year," the Journal notes, calling the rising prices "part of broader uptick in inflation in the U.S. economy".

The median price of the top 20 bestselling microcontrollers is up by more than 12% since the middle of last year, according to Supplyframe Inc.

Dale Ford, the chief analyst at the Electronic Components Industry Association, concluded: “Raw-material costs have gone up more recently, and I think people are now saying this is not a temporary situation. Price increases are going to be durable.”