The world’s largest chipmaker has refused to rule out price increases as rising input costs squeeze margins, a development that threatens to exacerbate inflationary pressures on British technology companies already grappling with a weak pound and higher borrowing costs.
Speaking on an earnings call this morning, the chief executive of the semiconductor behemoth acknowledged that “persistent cost inflation” across raw materials, energy, and logistics was forcing the company to consider passing on expenses to customers. While no final decision has been made, the mere suggestion of a price hike sent ripples through London-listed tech stocks, with shares of key UK chip distributors and hardware manufacturers sliding by as much as 4 per cent in afternoon trading.
For British firms, the warning could not come at a worse time. The UK’s tech sector, which relies heavily on imported semiconductors, is already reeling from a 15 per cent depreciation in sterling against the dollar over the past year, making dollar-denominated chip purchases more expensive. Add to that the Bank of England’s tightening cycle, which has pushed gilt yields to multi-year highs, and the cost of capital for these firms has risen sharply.
“This is a classic case of cost-push inflation filtering through the supply chain,” said a senior industry analyst. “British tech companies are caught between a rock and a hard place: they cannot absorb higher chip prices without sacrificing margins, but raising their own prices risks dampening demand in an already fragile economic climate.”
The chipmaker’s comments also underscore a broader structural issue: the concentration of semiconductor manufacturing in a few global players gives them significant pricing power. For the UK, which produces less than 1 per cent of the world’s chips, this means vulnerability to external price shocks.
Investors are now closely watching the Bank of England’s next move. If higher chip prices feed through to consumer electronics and industrial goods, it could force the MPC to maintain a hawkish stance for longer, further depressing growth. The yield on the 10-year gilt, currently hovering around 4.3 per cent, could climb further if inflation expectations become unanchored.
For now, the City is taking a wait-and-see approach. But with the chipmaker’s warning still fresh, the bottom line for British tech is clear: the cost of doing business is rising, and there is no easy fix.
One cannot help but recall Margaret Thatcher’s maxim: “You can’t buck the market.” And the market, it seems, is telling us that chip prices are heading north.
