Chip materials supplier warns of further rise in costs

The CFO of Showa Denko, which supplies TSMC and others, told Bloomberg that it expects to further raise prices in response to economic challenges

A company which provides essential chip fabrication materials to some of the world's biggest chip makers has warned that prices of materials could continue to rise heading into 2023.

Bloomberg reports that Japanese supplier of chemicals Showa Denko K.K. expects to further raise prices and cut back unprofitable product lines as it battles global economic challenges.

The company works with the likes of TSMC and Infineon Technologies AG providing key chemicals used in the chip production chain.

Covid-19, surging energy costs, and the weakening of the yen means the situation is unlikely to improve in the near future, CFO Hideki Somemiya told Bloomberg.

"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," he said.

"The current market moves require us to ask twice the amount we had previously calculated.

"The current yen moves are not desirable for us at all because the weak yen is further pushing up the cost of raw materials. Measures to deal with the yen that we as a company can undertake are very limited."

The cost of materials is likely to have global implications on the channel because of the knock-on effect on its customers like TSMC, which supplies some of the world's biggest vendors, including Apple.

Showa Denko is just one of a number of material providers who are upping their costs in response to the current economic climate.

The report from Bloomberg also adds that the company has started terminating the sale of certain commodity products and contracts with customers where it "doesn't see the potential to carry on business profitably".