Consumers are facing price increases and the shortage of products from TVs and mobile phones to cars and game consoles as a worldwide shortage of semiconductors increases.
The shortage of chips, the ‘brain’ in every electronic device in the world, has been steadily increasing since last year.
Initially, the problem was only a temporary delay in inventory, as factories ceased when the coronavirus pandemic first hit.
Although production is back to normal, a new increase in demand, driven by changing habits fueled by the pandemic, is now reaching a crisis point.
Car manufacturers investing in technology-heavy electric vehicles, the boom in sales of TVs and home computers and the introduction of new game consoles and 5G-enabled mobile phones are all in demand.
Even the mighty Apple, a $ 2 ton company and the world’s largest buyer of semiconductors spending $ 58 billion annually, had to delay the launch of the iPhone 12 by two months last year due to the shortage.
“Chips are everything,” says Neil Campling, media and technology analyst at Mirabaud. ‘Here’s a perfect storm of supply and demand factors. But basically there is a new level of demand that cannot be sustained, everyone is in a crisis and it is getting worse. ”
Ford recently canceled shifts at two car plants, saying profits could hit $ 2.5 billion this year due to chip shortages, while Nissan is producing diapers at factories in Mexico and the US. General Motors said it could hit a $ 2 billion profit target.
Last month, Sony, which along with other console manufacturers has struggled with stock shortages over the past year, said it may not meet sales targets for the new PS5 this year due to the semiconductor conduction problem. Microsoft’s Xbox said it predicts supply issues will continue for at least the second half of the year.
However, the most telling example of the semiconductor crisis comes from Samsung, the second largest buyer of chips in the world after Apple. Earlier this week, the company said it would be possible to postpone the launch of its high-end smartphone due to the shortage, although it is also the second largest producer of chips in the world.
“It’s amazing that Samsung sells $ 56 billion worth of semiconductors to others and consumes $ 36 billion of them itself, and finds that it may have to delay the launch of one of its own products,” says Campling.
Samsung’s co-CEO Koh Dong-jin, who also heads his mobile business unit, stressed an important issue and said there was a ‘serious imbalance’ in the order in which the get limited stock chips.
Carmakers, who cut off chip orders last year when vehicle sales fell, find themselves at the back of the queue as they try to reorder when the market recovers. The entire global automotive industry buys about $ 37 billion worth of chips, with the largest players such as Toyota and Volkswagen each spending more than $ 4 billion, making them relatively small stock for semiconductor suppliers.
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‘The cars that were hit the hardest were cars because they were to the party last time; If Apple spends and grows $ 56 billion a year, who’s going to keep the stock first? ‘says Campling.
It looks like the scarcity of chips will continue for some time to come. It can take up to two years to get complex semiconductor manufacturing plants up and running, and manufacturers are significantly raising prices for the second time in less than a year.
“There is no sign that supply is catching up, or that demand is declining, while prices are rising throughout the chain,” says Campling. ‘It will pass to people in the street. Expect cars to cost more, phones cost more. This year’s iPhone is not going to be cheaper than last year. ”