Qualcomm raises chip prices by double digits as supply costs surge

Qualcomm Inc., the world's largest smartphone processor maker, informed customers it will raise prices by a double-digit percentage for products shipped after Sept. 1, according to a letter seen by Bloomberg News.

"We have exhausted our ability to absorb rising costs from suppliers," Qualcomm wrote in the letter, adding that it had attempted to secure alternative components from new sources.

The San Diego-based company is one of Taiwan Semiconductor Manufacturing Co.'s largest customers. Like the rest of the tech industry, Qualcomm is grappling with historic supply shortages that have hit everything from smartphones to supercomputers. A surge in AI data center construction has strained production of memory chips and other semiconductors, while also making more prosaic components difficult to obtain.

The price increase shows that semiconductor companies retain enough pricing power to pass through inflationary costs, a positive for margins across the sector. But it also threatens to squeeze downstream margins for smartphone makers including Samsung Electronics Co. and Xiaomi Corp., as well as Meta Platforms Inc., which uses Qualcomm chips in its wearable devices.

Qualcomm shares fell 0.5% on Friday despite a midday spike after the Bloomberg report, according to Investing.com data. The broader market showed resilience, with the Nasdaq 100 turning positive after an early 1.3% decline, while Nvidia Corp. rose 1.2% to session highs — suggesting investors viewed the pricing action as a sign of sector strength rather than a cost-push warning.

Qualcomm's pricing power reflects its dominant position in smartphone processors and its expanding footprint in automotive, IoT, and mixed-reality chips. The company supplies modems and application processors to virtually every major handset maker, giving it significant leverage to pass through cost increases.

The price hike also highlights the deepening impact of AI infrastructure spending on the broader semiconductor supply chain. As hyperscalers pour capital into data center construction, foundry capacity at TSMC and other manufacturers has become increasingly constrained, pushing up wafer prices and packaging costs. Qualcomm, which relies on TSMC for its most advanced chips, is among the first major customers to formally pass those costs to end buyers.

For investors, the question is whether Qualcomm's pricing power can offset volume risk if smartphone makers respond by reducing orders or delaying product cycles. Qualcomm trades at roughly 22 times forward earnings, a discount to Nvidia's 35 times but a premium to Intel's 15 times, reflecting its steady cash generation from the handset market.

This article is for informational purposes only and does not constitute investment advice.