According to a report from Nikkei Asia on the 22nd, Renesas Electronics, NXP Semiconductors and other chipmakers are raising prices on semiconductors that go into cars and telecom equipment as they attempt to maneuver out of a squeeze created by soaring demand and limited foundry capacity.

The report pointed out that Renesas recently asked its clients to accept higher prices for power semiconductors, which control voltage, and the microcontrollers that control the driving of cars. The prices of these automotive chips will be raised by several percent, and those of chips for servers and industrial equipment will be increased by 10% to 20% on average.

Toshiba has also started negotiations to raise its prices for automotive power semiconductors, among other products.

Nikkei further stated that, overseas chipmakers, including NXP, the world's second-largest supplier of automotive chips, and Switzerland's STMicroelectronics, have also demanded that clients pay about 10% to 20% more. An NXP representative told Nikkei on Thursday that the company has revised prices but cannot comment further. An STMicroelectronics representative declined to comment.

Chipmakers have not disclosed what clients are subject to the higher prices, but it appears Toyota Motor-affiliated Denso and Germany's Continental, a supplier to Volkswagen and other automakers, are among them.

Chipmakers have also demanded that trading houses and other companies pay more.

Many chipmakers have their own factories, but most outsource production to Taiwan Semiconductor Manufacturing Co. and other foundries. Demand for chips used for smartphones and data centers has grown as more people work and study from home to slow the spread of COVID-19.

Other factors are also at play, and when demand for automotive chips began to surge late last year, foundry capacity was pushed to near its limit, pushing up outsourcing costs. Prices of gold and other semiconductor substrate materials are also rising. These cost increases are now being passed on through higher chip prices.

Chip shortages have already forced Toyota and other automakers in and out of Japan to cut production.

Subaru will further trim production in February. "Securing chips is our priority right now, no matter how high prices go," a Subaru executive said, hinting that the automaker will absorb the price increase. A source at German parts maker Continental said it will take about six months before things return to normal.

"The semiconductor industry has outsourced certain processes to a very limited number of [contract manufacturers], and this is very much a structural issue," Hidetoshi Shibata, CEO of Renesas Electronics, said on Friday at a Tokyo event. "Factors such as ups and downs of automobile production have given a final blow, and I would like to start discussing with automobile customers what kind of initiatives are needed."

Shibata's implication is that resolving the current supply crunch will be challenging in the short term.

Ikuya Kawasaki, President of Infineon Technologies Japan says that increasing capacity takes time. "Making a chip plant takes two to three years," Kawasaki said. "Not only a long-term commitment but also understanding 'how much of what product is needed when' is crucial for continued investment."

He said Infineon, which makes its own chips as well as outsources some production to contract manufacturers, is in a better position than much of the rest of the industry to make estimates as it supplies global automobile suppliers, which allows it to estimate long-term demand.

Now that contract chip producers are in a squeeze, Kawasaki said, "it is important to share long-term trends with them."

The report point out that it is not unusual for chipmakers to demand price increases for products that become unprofitable as costs rise. But multiple chipmakers are now boosting the prices of multiple products for the first time since the dot-com bubble, according to Akira Minamikawa, a director at U.K. research firm Omdia.

Editor’s Note: This post is edited from a Nikkei Asia report.