Taipei (Taiwan) - The U.S. dollar appears to be recovering again lately, but there is no denying that the value of the currency has dropped low enough to upset global markets and it appears to be low enough to be hitting back U.S. IT companies that rely on manufacturing contractors in Asia.
We have just arrived in Taipei to cover Computex 2008 and while we are settling in, it appears that one of the hot stories on dinner tables is the situation as Taiwanese contract fabs. Just like the U.S. airlines keep a close eye on each other to make price adjustments, one contractor is m is waiting for the other to make a move. In this particular case, it is all about TSMC and UMC. Reuters recently said that TSMC is looking for ways to increase wafer prices by 3-5% in order to offset the falling U.S. dollar, inflation, and, of course, rising oil prices. Such a move could lead to a rise in prices coming from all contract manufacturers, putting fabless semiconductor companies in a tough spot.
It is interesting to note that that a possible price increase would not span across all products, but target especially the most lucrative segment - high-end manufacturing. This means that Wi-Fi, Bluetooth, Gigabit Ethernet and other controller chips would not see higher prices, but GPUs and processors from AMD (ATI), Nvidia, Sun and Via would.
It is an interesting situation and we are sure that the AMDs and Nvidias are watching the development closely. No official information has been given at this point and it appears that the pendulum can swing both ways: If UMC increases the prices for more services, TSMC could follow suit and increase the prices for all of its chips. On the other hand, UMC might decide to sacrifice its profit margin and win new business. In the end, UMC has only one third the revenues of TSMC.
Our impression is that the humid semiconductor heaven of Taipei is nowhere near the oil hysteria we are currently witnessing in the U.S.
We did, however, notice that the majority of taxis in Taipei switched to natural gas, though.