higher semiconductor prices mean more expensive hardware

NEWSWEEK
February 15, 2010

I’M A (PRICIER) PC

By
Jessica Ramirez

Ten years ago, the dotcom bust caught the semiconductor industry
with its pants down. Cratering demand left chip makers with a
glut of products and idle factories. So when the financial
crisis hit, chip makers, keen not to repeat the same mistake,
quickly scaled down by closing plants, cutting production, and
decreasing overall costs. A year later, it appears they may
have overreacted. Although global chip sales fell by 9 percent
(a dip of roughly $22.3 billion) in 2009, demand grew faster
than expected in the second half of the year, leaving supplies
tight. The resulting chip shortage is expected to drive up some
prices through 2012.

That’s good for chip makers; no so much for consumers. For the
first time ever, the price of the semiconductor components of a
PC will rise over the previous year. Brian Matas, of the
market-research firm IC Insights, expects the cost of DRAM
memory chips to increase 17 percent this year, 22 percent in
2011, and another 10 percent in 2012. “What you’ll see is less
memory in a computer, or they’ll pass the price on to consumers,”
he says. Flat-screen TVs also may get pricier, especially ones
with LED screens. Flat-screen monitors could rise by as much as
20 percent, says Ben Lee, an analyst at the IT research firm
Gartner. Officials at the Semiconductor Industry Association say
it’s too early to forecast long-term impact, but analysts say if
anything, those estimates are conservative. Either way, the
little chips that make our gadgets go are likely to carry bigger
price tags in the near future.

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