Recently, MediaTek issued a rare public notice announcing price adjustments for its products. This is one of the few times in recent years that MediaTek has initiated a price adjustment mechanism with customers via written notice. With global semiconductor supply chain costs continuing to rise and advanced process and packaging capacity in short supply, this may be the beginning of a new wave of price increases in the IC design industry.
In the price increase notice, MediaTek stated that the global semiconductor component supply chain continues to face significant challenges, including unprecedented component shortages, limited capacity, extended supplier delivery times, and rising raw material and logistics costs, all of which have led to a substantial increase in supply costs, impacting the overall supply chain.
To address the rising costs, MediaTek stated that it has taken several measures, including renegotiating terms with suppliers, optimizing operations, and reallocating resources to ensure a continued and stable supply to customers, and absorbing costs to the best of its ability. However, the magnitude and persistence of current cost increases necessitate a re-evaluation of its pricing structure to ensure production capacity, maintain supply continuity, and continue investing in key technology R&D to support future customer growth. Specific details of the adjustments will be explained by the business manager.
MediaTek previously revealed that rapid expansion of AI data center investments has driven up costs across the entire semiconductor supply chain, impacting the smartphone industry. Some terminal brands have already raised prices and increased the proportion of high-end products. The company may maintain its gross margin through a "rigorous pricing strategy," which the industry interpreted at the time as a shift towards a more aggressive pricing policy.
With continued growth in demand for AI servers and high-performance computing (HPC), resources for advanced processes, advanced packaging, and key components are becoming increasingly scarce, and cost pressures are gradually being passed on to IC design companies. Whether major IC chip manufacturers will follow suit after initiating price adjustments will be a key indicator for the semiconductor market in the second half of the year.
High-end Android phones face rising costs across the board.
MediaTek reportedly plans to raise prices across its entire product line, including mobile processors, communication chips, and smart hardware chips. However, the price adjustment space for low-end chips is limited by market demand. The Dimensity 9600 Pro, targeting the high-end market, is the main driver of the price increase – the procurement price of a single Dimensity 9600 Pro chip has exceeded $216, compared to approximately $180-$200 for the previous generation Dimensity 9500, representing an 8%-20% increase in cost.
With the soaring cost of 2nm chips, the price threshold for Android flagships is being significantly raised. The industry characterizes this round of chip price increases as a structural price adjustment, leading to a comprehensive increase in costs for high-end Android phones. The Dimensity 9600 Pro uses TSMC's N2P enhanced process, with a wafer price exceeding $30,000, representing a more than 20% increase in production costs compared to 3nm chips. Coupled with the simultaneous price increases for LPDDR6 and UFS 5.0 storage components, the cost of the three core hardware components for flagship phones will exceed $600. Based on industry trends, Qualcomm's new flagship Snapdragon 8 Elite Gen 6 Pro is expected to be priced at over $300.