Smartphones, servers and other key ICT equipment are likely to rise in price from as early as next year as a result of price hikes and rising staff costs.

Clients of Taiwan Semiconductor Manufacturing Corp (TSMC), the world's biggest chip manufacturer, are still reeling from the company's plans to increase prices by as much as 20%, according to multiple reports.

While the Taiwan giant is following many of its smaller competitors, who have already raised prices, the breadth of the price rises have shocked come customers, industry execs have told Nikkei Asia.

The biggest price rises will be for those requiring additional capacity or for chips made with older processes – which is slightly reassuring for makers of 5G handsets and other high-end products.

Orders for advanced chips made with 7nm processes or below will attract lower prices rises of around 7-9%.

Additionally, the higher TSMC prices will help drive out "double bookings," where chip customers book capacity because of supply uncertainties.

TSMC chairman Mark Liu claimed in April that "actual capacity is larger than demand" in the industry, but was being soaked up by double bookings.

However, most analysts agree that the foundry sector lacks capacity for older chip technologies, which is why TSMC and SMIC have recently announced investments in 28nm capacity in China.

Altogether, TSMC has committed to investing $100 billion in new capacity over the next three years. But this spending burden has also become one of the reasons for the price rises.

TSMC won't impose its higher price until it starts writing new contracts in 2022.

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Another problem is the growing shortfall in talent and the pressure on wages.

That is especially true in China, which is undergoing an explosion in chip industry investment, with $28 billion forecast capex spending over 2012-22. It is already the biggest provider of chip package and assembly services and has several of the biggest foundries.

China's semiconductor industry job hires in the first quarter were up 65.3% over 2020 and 22.2% over 2019, according to a survey by recruitment firm 51jobs.com.

In March, the demand for chip talent accounted for 5.5% of job vacancies, fourth in all industries, up from just 2.6% two years ago.

Packaging and testing companies said they would increase salaries by 20-25%, design companies by 20-25% and chip manufacturers by 10-15%.

Taiwan is under similar pressures. According to the 104 Job Bank, the industry talent gap has hit a six-and-a-half year high, with 27,700 unfilled positions, of which 15,000 are engineering jobs.

The wider price problem is not just chips; prices are rising right across the supply chain.

Global shipping costs, for example, have soared. It now costs ten times more to send a container from Asia to Europe than it did in May 2020. From Shanghai to Los Angeles is six times more expensive.

— Robert Clark, contributing editor, special to Light Reading