How to structure this contract
- Split chips from fab equipment. They are priced by different forces and need separate formulas.
- Index chip prices. Use the BLS Semiconductor and Related Device Manufacturing PPI, PCU334413334413.
- Index fab equipment separately. Use PCU333242333242 plus controls, labor, and cleanroom construction inputs.
- Add a cap and floor. The chip index drifts down more often than it rises, so say whether the price may fall, and size a cap and floor.
Chips and fab equipment are different markets
A memory chip and a lithography machine are both "semiconductor manufacturing," but they are priced by completely different forces. Over the last decade the BLS chip index has trended down, with one rise around 2022. The fab equipment index has trended up. Price them separately.
Chips: memory, logic, and related devices
Use the BLS Semiconductor and Related Device Manufacturing PPI, series PCU334413334413. This index covers the chips themselves.
The chip index is calm for a market known for shortages. It moves in a narrow band and has fallen year on year in most months. A clause on this series will mostly be a clause about declines, so say whether the price is allowed to fall with the index. A price that only ratchets up would drift away from the series. See the cap and floor guide for how to size a cap and floor.
Fab equipment: lithography, etch, and deposition tools
Use the BLS Semiconductor Machinery Manufacturing PPI, series PCU333242333242. This covers the capital equipment used to fabricate chips, not the chips themselves.
| Component | Benchmark | Note |
|---|---|---|
| Precision machinery and tooling | PCU333242333242 | The equipment itself |
| Specialty electronics and controls | PCU334511334511 (proxy) | Guidance and control systems, closest available proxy |
| Skilled engineering labor | Regional semiconductor-industry wage index | |
| Cleanroom construction | General commercial construction cost index | Fabs require specialized cleanroom build-out |
A worked example
Take a contract signed in September 2025 with $2,000,000 of wafer supply scope, invoiced in September 2026.
| Base index, Sep 2025 | 29.45 |
| Current index, Sep 2026 (revisable) | 28.801 |
| Ratio, 28.801 ÷ 29.45 | 0.9780 |
| Amount at signing | $2,000,000 |
| Adjustment taken off that amount | −$44,075 |
Live figures from the stored series, updated when the provider publishes. Sep 2026 can still be revised, so a clause should say whether the invoice uses the first published value or is trued up later.
In the last ten years this series never moved more than about 7% in 12 months, so a 15% cap would not have bound once. The terms that decide the outcome are the floor and whether the price may fall. Write both down before signing, not after the index moves.
Don't cross-index chips and equipment
Never benchmark a chip supply contract against the fab equipment index, or the reverse. PCU334413334413 and PCU333242333242 measure different markets moving on different cycles. A contract priced against the wrong one will be wrong in a consistent direction, because one series has trended down and the other up.
Over the 12 months to Sep 2026, these series moved differently. On the same $2,000,000, the gap between the highest and lowest is $74,106.
| Series | What it covers | 12 months | On $2,000,000 |
|---|---|---|---|
PCU334413334413 | Semiconductor and Related Device Manufacturing | −2.2% | −$44,075 |
PCU333242333242 | Semiconductor Machinery Manufacturing | +1.5% | +$30,031 |
Live index data
- US PPI: Semiconductor and Related Device Manufacturing: current value, year-over-year change, and a free calculator
- US PPI: Semiconductor Machinery Manufacturing: current value, year-over-year change, and a free calculator