Thursday, September 23

The global shortage of computer chips ‘reaches a critical point’ | Technology sector

Consumers are facing price increases and shortages of products, from televisions and mobile phones to cars and game consoles, as the global shortage of semiconductors grows.

The shortage of chips, the “brain” of all the world’s electronic devices, has been steadily getting worse since last year.

Initially, the problem was only a temporary delay in supplies, as factories closed when the coronavirus pandemic first struck.

However, even though production has returned to normal, a further surge in demand driven by the change in habits driven by the pandemic means that it is now reaching a crisis point.

Car manufacturers investing in high-tech electric vehicles, booming sales of televisions and home computers, and the launch of new 5G-capable mobile phones and game consoles have driven demand.

Even mighty Apple, a $ 2 trillion company and the world’s largest semiconductor buyer spending $ 58 billion a year, was forced to delay the launch of the highly publicized iPhone 12 by two months last year due to shortages.

“Chips are everything,” says Neil Campling, a technology and media analyst at Mirabaud. “There is a perfect storm of supply and demand factors here. But basically, there is a new level of demand that cannot be satisfied, the whole world is in crisis and it is getting worse ”.

Ford recently canceled shifts at two auto plants and said earnings could be hit by up to $ 2.5 billion this year due to chip shortages, while Nissan is shutting down production at plants in Mexico and the United States. General Motors said it could face a $ 2 billion profit hit.

Last month, Sony, which along with other console makers has struggled with a shortage of stocks for the past year, said it may not meet sales targets for the new PS5 this year due to the semiconductor supply issue. Microsoft’s Xbox has said it expects supply problems to continue until at least the second half of the year.

However, the most telling example of the semiconductor crisis comes from Samsung, the world’s second largest buyer of chips for its products after Apple. Earlier this week, the company said it might have to postpone the launch of its high-end smartphone due to shortages, despite being also the world’s second largest chip producer.

“It’s unbelievable that Samsung sells $ 56 billion worth of semiconductors to others, and that it consumes $ 36 billion of them, discovers that it may have to delay the launch of one of its own products,” says Campling.

Samsung Co-CEO Koh Dong-jin, who also heads its mobile business unit, highlighted a major issue by saying there is a “Serious imbalance” in the pecking order of who gets the limited supplies of chips.

Automakers, who cut chip orders as vehicle sales fell last year, found themselves at the end of the line when they tried to reorder when the market rebounded. The entire global auto industry buys roughly $ 37 billion worth of chips, with major players like Toyota and Volkswagen spending more than $ 4 billion each, making them relatively small for semiconductor suppliers.

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“The most affected have been the cars because they were the last to arrive at the party; If Apple is spending $ 56 billion a year and growing, who are you going to keep supplies for in the first place? “says Campling.

It looks like the chip shortage will persist for some time. It can take up to two years to get complex semiconductor production factories up and running, and manufacturers are in the process of raising prices significantly for the second time in less than a year.

“There are no signs that supply is picking up or demand is declining, while prices are increasing throughout the chain,” says Campling. “This will happen to the people on the street. Expect cars to cost more, phones cost more. This year’s iPhone is not going to be cheaper than last year’s. “

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