The industry game behind the chip pricing battle
In the technology industry, chips are undoubtedly one of the most critical core components. As the "brain" of smart devices, the performance of the chip directly determines the running speed, power consumption performance and the realization of a variety of intelligent functions of the device. Chip manufacturers have been fiercely competing in this field, constantly pushing for innovation to gain a larger market share.
In recent years, with the rise of emerging technologies such as 5G communication and artificial intelligence, the performance requirements for chips are also increasing. In order to meet these needs, chip manufacturers have increased R&D investment and launched a series of new products with excellent performance. The high R&D cost has also caused the chip pricing to rise, which has aroused widespread attention and discussion inside and outside the industry.
As the world's leading supplier of wireless communication chips, Qualcomm's price increase has raised questions from consumers and industry insiders. On the one hand, Qualcomm explained that factors such as rising raw material costs and tight supply chains have led to an increase in chip prices. On the other hand, there are also opinions that Qualcomm has motives such as monopoly pricing and profit maximization.
The return of Huawei's self-developed Kirin chips to the market has also added new variables to this chip pricing battle. Although there is a certain gap between the Kirin 9000S and the latest 3nm flagship chip in terms of performance, its performance is not inferior in combination with actual experience and word of mouth. Kylin chips are deeply integrated and optimized with the HarmonyOS system to maximize chip performance.
What is the impact of chip pricing?
It is undeniable that the rise in chip pricing will directly affect the price of terminal devices such as mobile phones. Taking Qualcomm Snapdragon 8 Gen3 as an example, it is reported that the price of a single chip has soared to about $200, which means that the cost of the chip alone is close to 1,500 yuan. If mobile phone manufacturers still have to pile up materials in terms of images and screens, the price of a solid Snapdragon 8Gen3 flagship machine may reach more than 5000 yuan.
Faced with the pressure of chip price increases, mobile phone manufacturers have to pass on the cost to consumers. This is also one of the important reasons why the price of domestic mobile phones has been rising in recent years. In addition to chips, other aspects of mobile phone manufacturing, such as labor and operation costs, are also continuing to grow, which together pushes up the overall price of mobile phones.
Excessively high prices will undoubtedly affect consumers' desire to buy. Data shows that in 2016, the shipment of mobile phones in mainland China reached 470 million units, and by 2023, it has dropped to 270 million units, a decline of more than 40%. The cycle for consumers to replace their phones has also been extended from 18 months to nearly 40 months. It can be seen that the high price of mobile phones has suppressed the demand of the domestic mobile phone market to a certain extent.
The underlying reasons for the chip pricing battle
Why is chip pricing rising? From the supply side, the continuous increase in R&D investment is one of the main reasons. With the rise of new technologies such as 5G and AI, the requirements for chip performance are getting higher and higher, and chip manufacturers have to increase R&D investment to remain competitive. In the case of Qualcomm, R&D spending in fiscal 2022 alone was $7.4 billion.
The shortage of global chip production capacity is also an important factor driving up chip prices. In recent years, affected by multiple factors such as the epidemic and geopolitics, the global chip supply chain has been hit hard, and its production capacity is difficult to meet the growing market demand. The imbalance between supply and demand has exacerbated the upward pressure on chip prices.
From the demand side, the requirements for chip performance in emerging technology applications are constantly increasing, which is also an important driving force for chip prices. Taking artificial intelligence as an example, training large-scale AI models requires strong computing power and has extremely high requirements for the computing power of the chip. This has created a huge market demand for high-performance chips.
On the other hand, due to the lack of strong competitors, Qualcomm and other leading chip manufacturers have a greater dominance in pricing. Taking the mobile phone chip market as an example, Qualcomm and MediaTek occupy nearly seventy percent of the market share, forming a de facto "duopoly" pattern. In the absence of strong competition, their pricing power naturally increases dramatically.
Break through the chip "stuck neck" dilemma
In the face of the rising chip pricing, how to deal with it has become a major issue in front of the entire technology industry. In the long run, improving the ability of independent innovation and breaking the monopoly pattern is the fundamental way out.
For China, vigorously developing an independent and controllable chip industry is undoubtedly a top priority. In recent years, the state has introduced a series of policies and measures to vigorously support the development of local chip enterprises. Due to the relatively weak foundation, there is still a certain gap between the mainland chip industry and the international advanced level, and high-end chips still need to rely on imports. Increasing investment, paying attention to basic research, and persistently promoting independent innovation are the only ways to break through the "stuck neck" dilemma.
It is also very important to further improve the industrial ecology and cultivate strong competitors. Only by forming a fully competitive market pattern can chip pricing truly return to a rational level. In this process, policy measures such as encouraging innovation and anti-monopoly will play an important role.
In addition, accelerating the internationalization of the chip industry is also the trend of the times. Due to the large number of links in the chip industry chain and the fine division of labor, it is difficult for any country or region to complete it independently. While insisting on independent innovation, we should also take the initiative to integrate into the global industrial division of labor system to achieve complementary advantages and win-win cooperation.