Intel To Hike Chip Prices As Semiconductor Giant Deals With Inflation

Intel tells its customers to expect price increases across its product line, including chipsets, microprocessors and other products by as much as 20 percent. Channel partners brace for industry-wide price hikes.

Intel Corp. told customers this week the company would begin hiking prices on its peripheral chip products in the fourth quarter as chipmakers deal with increasing costs.

“On its Q1 earnings call, Intel indicated it would increase pricing in certain segments of its business due to inflationary pressures,” Intel told CRN in a statement. “The company has begun to inform customers of these changes.”

The Santa Clara, Calif. semiconductor giant told channel partners and other customers to brace for price hikes of up to 20 percent in Q4 2022, sources confirmed to CRN. The news was first reported by Nikkei Asia.

[RELATED NEWS: INTEL NOW PREPPING OHIO SEMICONDUCTOR FAB]

Multiple tech companies have reported slowing sales after two years of booming growth due to remote work forced by the COVID-19 pandemic. Consumer demand for smartphones, PCs, TVs and game consoles began showing signs of weakness in early 2022 earnings reports.

Sources told CRN an official Intel communication indicated all processors, chipsets, and data center products like FPGAs, NUCs and programmable devices will be affected. Intel told customers the price hikes are required because of inflationary pressures, rising material costs and production cost increases.

Tom Morton, senior account executive at Burnsville, Minn.-based Nor-Tech, said news of the price hikes aren’t surprising. “We’re already seeing increased costs in our industry from Nvidia for GPUs and Mellanox gear,” he said. “With increased supplier component costs, and in these inflationary times, I wouldn’t be surprised to see AMD follow suit and increase prices. The increased fab (manufacturing) costs for Intel could also be a factor driving prices up.”

Mike Turicchi, vice president at Gainesville, Va.-based NCS Technologies, sees a rough road ahead in the tech industry. “We are hearing rumblings about upcoming price increases from many of our technology partners,” he said. “We are also seeing more fluctuation on prices stability from distribution channel partners. Quoting new opportunities for Q4 will be challenging because of the cost volatility and suppliers’ unwillingness to adhere to long-term program pricing.”

He added, “I fear this trend will continue and will most certainly have a negative impact on the industry, causing customers to reconsider purchases.”

A chip shortage driving demand had held prices as PC makers recorded record shipments in 2020 and 2021. During a press conference last week, Acer Chairman Jason Chen told reporters his company was no longer suffering a chip shortage. “Some of the chip suppliers’ CEOs even called me recently to buy more chips from them,” he said. “The situation has changed.”

Intel has warned of weaking demand in its last earnings report in April and warned of macroeconomic pressures facing the company due to COVID-19 lockdowns and the Russia/Ukraine war. In June, Intel froze hiring in its PC chip division citing macroeconomic uncertainty. In April, the company announced that it would be pulling out of Russia completely, affecting 1,200 workers.

Intel CEO Pat Gelsinger in February told investors to expect lower margins as the company lays out billions of dollars to build manufacturing hubs in the U.S. and Europe. That news sent stock prices tumbling.

Fellow semiconductor giant, Taiwan-based TSMC has told clients it will raise prices by a “single-digit” percentage in 2023, Nikkei Asia reported, less than a year after its largest price increase in a decade. Nikkei reported that suppliers of chip materials such as Shin-Etsu Chemical, Sumco and Showa Denko have all told clients they will increase prices by at least 20 percent. GlobalWafers, the world’s no. 3 wafer material maker, also recently said it would race prices for chipmakers.