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Shin-Etsu raises the price of silicon by 20%, what will happen to the chips?

According to Shin-Etsu Chemical, the cost of metallic silicon is increasing, and together with the strong growth in demand in the market it has caused supply shortages and increased production costs for them, thus they have been ‘forced’ to increase the fees that are passed on. For you to take it into account, this is the world’s largest manufacturer of silicon semiconductors, which are the wafers that manufacturers such as TSMC, Samsung or SMIC then use for their lithography machines and the manufacture of all kinds of chips.

Why is the price of silicon going up?

Due to the shortage of supply, the costs of methanol and the catalyst raw materials (including platinum) with which they make silicon wafers have increased, just as according to this Japanese manufacturer the cost of logistics and materials has increased. secondary. Shin-Etsu Chemical believes that it is impossible to continue absorbing these increased costs through their own efforts to reduce manufacturing costs alone, so they have had to increase the price of all their silicon-based products by 10-20 %.

Admittedly, this is Shin-Etsu Chemical’s first price hike in more than three years. The last time they announced a price increase for their products was in November 2017, when they also announced a rise of between 10 and 20% applicable from January 2018.

According to the data, Shin-Etsu Chemical was established in Japan in 1926 and its main products include polyvinyl chloride, organosilicon, semiconductor silicon, cellulose derivatives, rare earth magnets and other materials. Among them, in the semiconductor wafer market this company is the largest supplier in the world.

According to statistics from research institutes, in September 2020 Shin-Etsu Chemical’s share in the global silicon wafer manufacturing market reached 29.4%, ranking first followed by SUMCO, also from Japan, with 21.9%. Global Wafer ranked third with a 15.2% market share, followed by Siltronic AC with 11.5% and fifth place, South Korea’s SK Siltron with a 11.4% share. It should be noted that Global Wafer recently bought Silitron AG and has become the second largest manufacturer of silicon wafers after Shin-Etsu Chemical.

Silicon market share

What repercussions will this price increase have?

Since the second half of last year, the market for chip foundries has been extremely bumpy and wafermaking capacity remains in short supply even today, and this has driven demand for silicon wafers, the necessary raw material. for its manufacture. There will be no large-scale production expansion in 2021 and supply remains very limited, which means that we will continue to suffer from shortages for some time.

It’s worth noting that since the second half of last year, foundries like TSMC, UMC, Global Foundries, and World Advanced have increased their 8-inch wafer prices by 10-15%; In December last year, it was rumored that TSMC would cancel the discounts that it usually applies for large orders of 12-inch wafers, although in the end it is unknown if this was carried out or not.

Wafer Cost Chips

According to Taiwanese media, due to limited production capacity, manufacturers UMC and World Advanced are also preparing to apply a price increase of between 10 and 15%; Judging from current news, Shin-Etsu Chemical would have already contacted its partners (to whom it sells the silicon wafers) in advance before announcing this price increase for the month of April, so these functions could raise their prices similarly.

In short: the cost of raw materials such as silicon has increased, as has the cost of logistics and secondary materials. This has caused major manufacturers to raise prices to foundries like TSMC, who in turn have also raised prices. This will inevitably result in the price of all products that have chips (which is almost everything today) see their price increased, and judging by the precedents, this increase in the price of the products would be precisely between 10 and 20%.