Chip prices are rising. Saturation caused by AI

Reuters broke the news on August 18: Samsung increased its chip manufacturing prices in July. Between 10 and 15% for the finest process nodes, and around 10% for the older ones. And this is not an isolated move—the other major manufacturer started the same trend in January, with a schedule of increases announced through 2029.

So yes, everything that contains a chip will cost more to manufacture. Will your next iPhone or Galaxy go up by 15%? We'll do the math at the bottom of the article, using the real figures, because that's the only thing we really care about and nobody is really clear about it.

A chip wafer costs about as much as a small used car. And it still needs to be cut up.

Two minutes to understand who makes what

Apple does not manufacture the iPhone's chips. Nvidia does not manufacture its graphics cards. Qualcomm does not manufacture the chips in Android phones. These companies design the chips, like an architect designs a house, and then send the blueprint to someone else who has the factory.

That someone else is called a foundry. There are two that really matter for the high end: TSMC, in Taiwan, and Samsung, in South Korea. They sell nothing to the general public. They manufacture on behalf of others and send them the bill.

And what comes out of the factory is not a chip. It's a large, round silicon wafer about a foot across, on which hundreds of chips are etched side by side, to be cut apart afterward. The price is calculated per wafer, not per chip. In fact, when they are not cut up, they produce a chip as large as a plate, and that is indeed what some companies are doing today for artificial intelligence.

A silicon wafer costs $20,000

And it still has to be cut, tested, partly discarded, and packaged. Silicon is not the expensive part of silicon.

At the finest process node currently available, a wafer costs between $18,000 and $20,000. For the next generation, which is on its way, the figure is more than $30,000. The “nanometer” everyone talks about is the fineness of the design: the smaller the number, the more microscopic switches can be packed onto the same surface, making the chip more powerful without consuming more energy. It is also what costs a fortune to develop, because at that scale, patterns smaller than a virus are being etched.

These figures come from the specialized press, not from an official price list: no foundry publishes its prices, as these are contracts negotiated with each customer individually. But the general order of magnitude is widely accepted.

The funniest part is knowing WHO is raising its prices

In the foundry market, during the first quarter of 2026, TSMC accounted for more than 70% of global revenue. Samsung accounted for around 7%. Ten times less. Samsung had lost customers, lost money, lost contracts, and much of the sector had ended up politely writing it off.

And that is the company that has just raised its prices by 15%.

On the left, they are no longer taking orders. On the right, it is reopening its doors.

Why can it afford to do that? Because the factory across the way is full. TSMC's advanced lines are saturated with demand for artificial intelligence chips, and when the top student is no longer taking copies, people turn to the second one. Samsung's line in Pyeongtaek has been running at full capacity since the end of 2025, and the company is forecasting double-digit growth in the second half of the year.

So I know that an article about a price increase is supposed to be bad news, but admit there’s something rather pleasing about it. For years, the industry’s biggest nightmare could be summed up in one sentence: a single company, on a single island, manufactures everything modern on this planet. A fire, an earthquake, a ship going astray, and the whole world stops shipping phones. Today, there’s a second factory running at full capacity. We’re paying 15% for it, and frankly, as an insurance premium, I’ve seen worse.

Okay, but how much does that add to my bill?

There are people whose job it is to take new devices apart piece by piece and estimate the price of each component. For the latest high-end iPhone, they come to around 408 dollars’ worth of parts for a device sold at 1,199. And in that total, the main chip—the famous in-house processor—accounts for around 91 dollars.

The top bar is what you pay. The bottom bar is what we’ve been talking about since the beginning of the article.

So 15% more for the chip comes to fourteen dollars. On a 1,199-dollar phone. In other words, practically nothing—about 1%, and far less than what the seller will deduct from your trade-in.

There, I’ve said it. If you’ve seen a headline along the lines of “chips are going up 15%, your devices are going to explode,” you can turn the page. That’s not how it works. The price of a phone includes research, software, marketing, distribution, taxes, and a margin, and components are only one part of it.

Where it really hurts, on the other hand, is with things that consist almost entirely of chips. A graphics card, a server, an entry-level laptop: when silicon represents half the manufacturing cost instead of one-twelfth, the increase is noticeable. And on the machines used to run artificial intelligence, where tens of thousands of chips are stacked together, fifteen percent is no longer counted in dollars but in millions.

What I think

We’ve reached something I find fascinating: the demand for computing power for AI has become so enormous that it is driving up the price of things that have nothing to do with it. The chip in your washing machine, the one in your car, the one in your set-top box: they come out of the same factories, and those factories are full because of servers you will never see.

I was just pointing out yesterday that a small American company had just raised 700 million to manufacture chips that can do only one thing. That’s part of the same trend too: when factory space becomes the limiting factor, everyone is trying to fit more useful work onto the same area of silicon. It’s not an engineer’s whim; it’s real estate.

And there’s one thing I never would have bet on three years ago: Samsung is making a comeback. The company was considered finished in this area, its yields were poor, and its customers were leaving. Today it has a full production line and is raising its prices. That doesn’t make it number one—there’s still a tenfold gap—but a second supplier that’s breathing is good for everyone. Including you, who will never know which factory made the chip in your phone.

So the next time someone explains to you over a family meal that their phone is expensive “because of artificial intelligence,” you’ll be able to reply that yes, that’s true—to the tune of about fourteen dollars. Enjoy your meal!

Sources

• Seoul Economic Daily: Samsung raises foundry prices up to 15% as TSMC capacity fills, August 19, 2026, based on Reuters (August 18)
• Tom's Hardware: Samsung raises advanced foundry prices by up to 15% as AI demand fills its 4nm lines
• TrendForce: TSMC reportedly to raise sub-3nm prices 3 to 10% in 2026, plans hikes through 2029
• Tom's Hardware: TSMC is reportedly hiking prices for all advanced nodes
• iPhone 17 Pro Max teardown estimate (parts cost, third-party figures)