Qualcomm told customers on Friday that it will raise prices by a double-digit percentage, saying supplier costs have risen beyond what the company can continue to absorb.

The San Diego-based chipmaker informed clients in a letter that the increases will apply to products shipped after September 1. QCOM stock fell 2.42% after Bloomberg reported on the letter, while Taiwan Semiconductor Manufacturing Co. (TSM) declined 2.93% on the day.

Qualcomm said it had reached the limit of its ability to offset higher supplier costs and had already attempted to find alternative components from new suppliers. Those steps were not sufficient to avoid passing costs on to customers.

Qualcomm operates on a fabless model, designing chips in-house but relying on outside foundries for production. The company is one of TSMC's largest customers. TSMC is the world's leading provider of outsourced chip manufacturing.

Semiconductor Supply Pressures

A sharp increase in AI data center construction has put heavy pressure on memory chips and other semiconductor categories. That strain has extended into more common components, tightening supply chains across the technology industry.

Qualcomm has been affected by those pressures in the smartphone market, where a shortage of memory chips has weighed on demand as capital spending shifts toward AI infrastructure. The global smartphone market has been recovering from a multi-year downturn, making the cost environment for handset makers a sensitive factor as device shipments begin to stabilize.

Qualcomm is the world's largest maker of smartphone processors. Its chips are used in devices sold by major Android manufacturers around the world. The company competes in the Android chipset market with MediaTek and others, a competitive landscape that makes passing costs through to customers a delicate decision.

Earnings Scheduled for July 29

Qualcomm is scheduled to report third-quarter results on July 29. The timing of the price-increase letter, sent only days before the earnings report, places additional attention on the company's cost structure and profit margins.

Qualcomm declined to comment on the Bloomberg report. Reuters said it could not independently verify the contents of the letter.

The planned price increases represent a notable change for the company, which had previously absorbed higher supplier costs rather than passing them through to customers.

It remains unclear how Qualcomm's customers have responded to the letter, including whether any clients have objected to the new pricing terms.

The double-digit increase will apply to products shipped from September 1 onward, giving customers a limited period before the new prices take effect.

QCOM stock had already entered Friday under pressure from broader concerns across the semiconductor market. The 2.42% decline following the report added to recent volatility in the shares.

With Qualcomm's July 29 earnings release approaching, market participants will be looking for additional details on the company's cost pressures and whether margins were maintained during the previous quarter.