Price competition in chip production will decrease and consumers will
Hardware

Price competition in chip production will decrease and consumers will suffer

For the past week, various analysts have been actively discussing the published information about Warren Buffett’s multi-billion dollar investment in shares of the Taiwanese company TSMC. The deal took place in the third quarter, but has only now been discussed by Open Source. According to experts, now is the right time to invest in TSMC equipment, but difficult times lie ahead for contract manufacturer customers.

    Image source: TSMC

Image source: TSMC

According to experts Fubon ResearchEven after selling surplus products, participants in the semiconductor components market will not expect a recovery in demand to the levels observed during the pandemic. Year-to-date, TSMC shares are down 36%, and prices will soon return to growth once the market sees signs of a recovery in chip demand. So far we can only say that the geopolitical risks associated with Taiwan began to recede after the meeting between the leaders of the United States and China. Tensions over Taiwan a few months ago alone drove TSMC’s share price down 30% to 40%, experts say. This assessment is shared by experts. MorganStanley.

In the long term, according to Goldman Sachs representatives, TSMC is sure to benefit from the increasing demand for components for 5G networks, artificial intelligence systems, Internet of Things, electric vehicles and solutions for the high-performance computing segment. Fubon Research analysts separately noted that Qualcomm’s refusal to use the services of the Chinese company SMIC sets an uncomfortable precedent for the latter. As a result of US sanctions being imposed, SMIC’s business could become completely dependent on Chinese customers.

At the same time, in all other cases, the geographic isolation of chip production will help reduce price competition. Building new businesses requires enormous funds, and they must be covered from the pockets of customers and end-users of products. In addition, outside of Taiwan, where the core business has historically been concentrated, transaction costs will be higher even due to less development of specialized infrastructure. For example, the founder of TSMC believes that releasing chips in the US will require a cost increase of at least 50% compared to Taiwan.

About the author

Dylan Harris

Dylan Harris is fascinated by tests and reviews of computer hardware.

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