Semiconductor chips to cost less as Chinese chipmakers offer price cuts

Pressure from Chinese wafer foundries’ price reductions is pushing chip prices lower across the semiconductor industry, according to a  report by Taiwan’s Digitimes.

Numerous Taiwanese IC design firms are optimistic, anticipating that local suppliers will maintain the trend of lowering prices, which could alleviate operational pressures and bolster competitive advantages, said the Digitimes report.

Foundries across China, Taiwan, and South Korea, including Samsung Foundry, are reducing prices to retain clients and orders, with strategic cuts and negotiations reflecting a broader trend of market adaptation and customer engagement, Taipei-based TrendForce said in a recent note.

The US Department of Commerce may launch an antidumping investigation if it believes that the Chinese firm’s price cuts are disrupting the market, Digitimes report said.

TrendForce cited a sluggish semiconductor market and stiff competition as reasons for the price cuts across the board, with Samsung Foundry reportedly offering 10% to 15% cuts.

Recently, electronics contract manufacturer Hon Hai, better known in the West as Foxconn, reported a 5.4% year-on-year decline in fourth-quarter sales, marking one year of quarterly drops, and expects further declines, amid weak PC and consumer electronics demand.

Dan Nystedt, vice president at TriOrient, an Asia-based private investment company, said it’s “tough to say” when retail will begin to feel the effects of this but “longer term it will help keep prices in check.” 

Taiwan Semiconductor Manufacturing Company (TSMC) is poised to remain a winner from the AI boom – despite the sluggish market leading to price cuts elsewhere – as it has secured foundry orders from both Nvidia and AMD, according to local media in Taiwan.

TSMC is set to reportedly manufacture up to 1.5 million chips for the GPU giants using its 5nm and 3nm processes, with Nvidia doubling its orders and AMD’s MI300 series production projected to reach 400,000 to 600,000 this year.

Meanwhile, the Wall Street Journal reported that Nvidia faces resistance to its downgraded AI chips from its Chinese clients as buyers prefer more powerful local alternatives. The downgrade was created in response to the US export curbs.

“If the restrictions are likely to only get tighter in the next few years, you’d better start thinking about alternatives now,” a senior executive at Alibaba Cloud, told the Journal referring to firms in China stockpiling Nvidia chips while they search for a locally-made alternative. US Secretary of Commerce Gina Raimondo said late last year that if Nvidia “[redesigns] a chip around a particular cut line that enables them to do AI, I’m going to control it the very next day.”