TSMC (2330-TW) supplier Showa Denko warned that semiconductor materials will rise until next year, and Showa Denko cut unprofitable product lines in response to challenges such as soaring energy costs and supply disruptions.
Showa Denko Chief Financial Officer Hideki Somemiya said further price hikes for chip materials are expected, due to supply constraints, soaring energy costs due to the war in Ukraine and a heavy yen depreciation, and the situation is not likely to improve significantly until at least next year.
Somenomiya Hideki said that it was forced to pass on the substantially increased costs to customers. Since Showa Denko is a supplier to manufacturers such as TSMC, Infineon and Toyota, the price increase could squeeze manufacturers’ profits or force customers to follow suit.
Somemiya Hideki said: “For all participants in the material industry, a common theme this year is how much we can convince customers to share in the cost. The current market conditions require us to ask for twice the original estimate.”
Toyo Securities analyst Hideki Yasuda said Showa Denko was not alone in raising prices, with other parts makers and material suppliers taking similar measures in response to difficult market conditions. Consumers of durable goods such as electronics may also see higher prices in the future, he said.
Showa Denko has begun terminating the sale of certain items and terminating contracts that have no potential for profit. Somenomiya Hideki said that before the end of the year, it will evaluate which areas to withdraw.
In addition to rising prices for raw materials and natural resources, Somenomiya said the sharp fall in the yen posed another challenge. The Bank of Japan’s ultra-loose monetary policy triggered the yen to fall to a 24-year low against the dollar.
Somenomiya Hideki said: “The current trend of the yen is not what we want to see, because the depreciation of the yen further increases the cost of raw materials. As a company, we can take very limited measures to respond.”
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