Japanese chemicals supplier Showa Denko looks to further hike prices and cut back unprofitable product lines in response to the economic challenges confronting the semiconductor industry, Bloomberg reports.
The move comes despite a dozen hikes already this year, reflecting the lockdown-induced supply crisis, surging energy costs from the Ukraine war, and the weakening yen CFO Hideki Somemiya acknowledged in an interview.
He added that the situation is unlikely to improve until at least 2023 significantly. He saw the weak yen further pushing up the cost of raw materials, further limiting its options.
Showa Denko also terminated the sale of certain unprofitable commodity products and contracts.
Showa Denko supplies essential chip fabrication materials to Taiwan Semiconductor Manufacturing Company Ltd. and Infineon Technologies AG..
Showa Denko’s price hikes could shrink margins or force customers to raise prices. It is a vital supplier of the chemicals used early in the production chain by chipmakers and other manufacturers like Toyota Motor Corp..
“A big theme this year common to all the players in the materials industry is how much cost burden we'd be able to convince customers to share with us,” Somemiya said. “The current market moves require us to ask twice the amount we had previously calculated.”
According to an analyst, other component makers and materials suppliers also made similar moves to beat the touch macros. The analyst also saw consumers of durable goods like electronics resorting to higher price tags.
Chipmakers like TSMC and Samsung Electronics Co., Ltd. notified their customers regarding price hikes to beat inflation concerns, rising costs, the Ukraine crisis, lockdown in China, and expansion plans to counter the global supply crunch.
Former JP Morgan Chase & Co. banker Somemiya exited Sony Group Corp. in 2021 to become the CFO at Showa Denko. At that time, he had criticized the chemicals supplier for being naive in negotiating prices and leaving profit on the table.
