TSMC price hike and a bargain-hunting Alibaba

Hello everyone! This is Cheng Ting-Fang from Taipei, covering semiconductors, supply chain, hardware and tech trends. This week Taiwan — Asia’s key tech economy — has suffered its worst Covid-19 surge since the pandemic started in 2020, recording more than 65,000 daily confirmed cases, the highest in Asia.

But for executives across the region’s tech supply chain, the more immediate challenge is restoring production after severe month-long lockdowns in the greater Shanghai area, the world’s most important electronics manufacturing hub. Apple has warned that the lockdowns could cost it up to $8bn, while Quanta Computer, whose most advanced MacBook production lines are near Shanghai, reported a nearly 40 per cent monthly sales slump from March. It was a similar story for Pegatron, whose most important iPhone assembly plants are near Shanghai: revenue plunged 35 per cent in April from the previous month.

The chips are up

At a time when demand for smartphones, PCs and TVs shows signs of slowing, Taiwan Semiconductor Manufacturing Co. has further unsettled the chip and electronics industry.

The world’s biggest contract chipmaker — which serves everyone from Apple and Qualcomm to Nvidia and MediaTek — has told customers it plans to raise its prices by “single-digits” by the start of 2023, citing increasing costs, Nikkei Asia’s Cheng Ting-Fang and Lauly Li write.

“I was quite surprised when I confirmed that TSMC will hike prices again,” an executive at one chip developer told Nikkei Asia. “At first, I thought, is this true or is it fake news? We had previously been hoping there could even be some discounts in the second half of this year, as overall demand isn’t very strong.”

Chip production costs have already been rising due to a supply crunch and more expensive logistics and materials. Higher fees for TSMC’s services could further push up the cost of everything from phones and computers to data centres and connected cars.

Given how rarely the Taiwanese titan has increased prices over the past decades, the chip developer executive says two notices of a hike within a year is a clear sign: “That means the industry is really changing.”

China’s comeback kid

Chinese smartphone maker Honor has made a dramatic comeback after its spin-off from embattled tech titan Huawei Technologies in late 2020. Its domestic shipments grew more than 200 per cent in the January-March quarter from last year, while most of its rivals, including Xiaomi, Oppo and Vivo, reported a decline in the same period.

Honor is now looking to expand globally, making European markets such as the UK, France, Germany and Spain a key focus, CEO George Zhao told Cheng Ting-Fang and Lauly Li in an exclusive interview with Nikkei Asia. The Middle East, Latin America and south-east Asia are also on Honor’s radar, he said.

Zhao also said there is no need for smartphone makers to be pessimistic, despite the macroeconomic uncertainties, supply chain disruptions and inflation concerns plaguing the industry. “After all, the smartphone market is still a massive market that ships some 1.3 billion to 1.4 billion units annually.”

Alibaba goes bargain hunting

Alibaba was once the undisputed ecommerce champion in China. The Taobao and Tianmao owner held a nearly 80 per cent share of the online shopping market in 2015, write the Financial Times’ Eleanor Olcott and Gloria Li.

But competition from domestic rivals JD.com, ByteDance and Pinduoduo has chipped away at its dominant position and now Alibaba has less than half the total online shopping market in China, according to research firm eMarketer.

Beijing’s move to break up the monopoly power of China’s major internet companies last year further accelerated the unwinding of Alibaba’s stranglehold on the country’s online shopping market.

But Alibaba has not sat back as its competitors expanded.

In March 2020, it launched Taobao Deals to target the estimated 930mn consumers in smaller and less affluent cities. After making hefty investments in the platform, leveraging its strong network of relations with manufacturers and efficient logistics and delivery systems, it quickly added 100mn active users, putting it in direct competition with price-competitive Pinduoduo.

Alibaba faces significant challenges, including the punishing impact of China’s lockdowns on consumer confidence, Chinese regulatory pressure to break up its internet empire and threats of delisting from New York over disputes over audit papers between the two global superpowers.

Analysts argue that Alibaba’s success in disrupting a new market in just two years underscores its enduring strength in ecommerce — even if this is not reflected in its battered stock price.

Consolidation conundrum

On the surface, Japan has a strong position in the specialist market for power semiconductors: its 21 per cent global market share is slightly ahead of nearest rival Germany.

The difference is that while Germany’s share comes from one company, Infineon Technologies, Japan’s is split among five players. Policymakers and industry observers are calling for Japanese companies to pool their resources in order to scale up and better compete on the global stage — but few seem willing to heed that call, writes Nikkei Asia’s Mitsuru Obe.

Denso has teamed up with a Taiwanese contract chipmaker to make power chips, while the likes of Mitsubishi Electric, Toshiba and Fuji Electric are all expanding production capacity on their own. Japan’s global market share in power chips, which are used to regulate power flows in everything from electric vehicles to trains to wind turbines, is already slipping. Some see worrying echoes of how the country lost its once-formidable lead in memory chips through a failure to consolidate and scale up production.

The question now is whether Japan can defend its power chip niche or suffer a repeat of history.

The chips are up

China’s comeback kid

Alibaba goes bargain hunting

Consolidation conundrum

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