a close up shot of a semiconductor

Photo: Glitterstudio (Shutterstock)

The global semiconductor industry suffered a potentially significant setback this week when Taiwan Semiconductor Manufacturing Co. (TSMC), a preeminent chip manufacturer that counts the likes of Apple, Toyota, and other global firms among its client list, announced a price hike for its suite of products. Nikkei Asia reports that TSMC could raise prices by as much as 20 percent.

For some companies that do business with TSMC, the spike is already in place, according to Nikkei. For others, as DigiTimes reports, it won’t go into effect until some time next year.

So, what’s this mean for you? Well, Nikkei notes that an increase in cost on the production end typically means an increase in cost on the consumer end (aka, Intro to Basic Economics 101). That said, it’s unclear how much consumer-facing sticker prices will increase—or what specific products will see downstream hikes. Semiconductors, of course, are present in all manner of modern technology, from cars to cell phones to personal computers. But they’re also essential components in some of the most coveted tech around: next-gen consoles.

Yes, the PlayStation 5 and Xbox Series X/S make use of CPUs and GPUs developed by Advanced Micro Devices (AMD). As Tom’s Hardware reported in March, AMD is one of TSMC’s biggest customers.

TSMC's San Jose headquarters

Photo: Michael Vi (Shutterstock)

The PS5 is available in two models: a $500 standard edition and a $400 one that’s fundamentally the same but does not include a disc drive. Next-gen Xbox consoles, meanwhile, cost $500 (for the top-flight Series X) or $300 (for the slimmer and less-powerful Series S). Neither Sony nor Microsoft has mentioned a customer-end price increase following TSMC’s hike, and it’s vanishingly unlikely that either company will implement one. After all, barring notable design overhauls—a la last gen’s PS4 Pro and Xbox One X upgrades—has a console manufacturer ever increased prices for its base offerings?

More likely: Consoles might become even harder to score.

It’s no secret that chip shortages are one of the major factors preventing gamers from securing PS5s and next-gen Xboxen. If there’s one rule of capitalism, it’s that someone always has to pick up the tab. Following the price hike, TSMC will pass on the higher cost to AMD, which will likely pass it on to Sony and Microsoft. Ramping up the sticker price of already expensive consoles would be a guaranteed PR disaster. The next logical cost-saving solution—and you don’t need an MBA to see this—is to reduce the number of suddenly pricier things you bring in for production. In this case, for Sony and Microsoft, that means purchasing fewer GPUs and CPUs from AMD.

Or maybe this is all baseless speculation—hinged on the notion that every company passes the buck—and nothing will change at all. After all, AMD reported a profit of $1.5 billion during its 2021 Q1 and a profit of $1.8 billion during Q2. It can take the hit.

 



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