Has the global semiconductor crisis reached its peak?

Around the world, people are faced with rising prices and even shortages of goods, from TVs and mobile phones to cars and game consoles, as the global semiconductor shortage grows.

The shortage of chips, the "brain" of every electronic device in the world, has been steadily worsening since last year.

Initially, the problem was only a temporary delay in deliveries, since the factories closed when the coronavirus pandemic had just begun. However, although production is now returning to normal, a new surge in demand caused by changing habits caused by the pandemic means that the shortage of semiconductors is now reaching a critical point.

Car manufacturers investing in high-tech electric vehicles, a boom in sales of televisions and home computers, as well as the launch of new game consoles and mobile phones with 5G support-all this has stimulated demand. Even the mighty Apple, a company with a turnover of $ 2 trillion and the world's largest buyer of semiconductors, spending $ 58 billion a year, was forced to postpone the launch of the advertised iPhone 12 for two months last year due to a shortage.

"Chips are everything ," says Neil Campling, media and technical analyst at Mirabaud. 
"There is a real boom in supply and demand factors here. But, in fact, there is a new level of demand that it is impossible to keep up with, everyone is in crisis, and it is only getting deeper."

Ford recently canceled shifts at two car factories and said that profits could be reduced by $ 2.5 billion this year due to a shortage of chips, at the same time as Nissan is suspending work at factories in Mexico and the United States. General Motors said it could lose $ 2 billion in profit. Sony, which along with other console manufacturers struggled with a shortage of inventory last year, said that it may not reach the target sales of the new PS5 this year due to problems with the supply of semiconductors. Microsoft's Xbox said it predicts that supply problems will persist until at least the second half of 2021.

However, the most striking example of the semiconductor crisis is Samsung, which is the second largest buyer of chips for its products in the world after Apple. Earlier, the company said that it may have to postpone the launch of sales of a new smartphone due to a shortage of chips-despite the fact that Samsung is also the second largest semiconductor manufacturer in the world.

"It is incredible that Samsung sells $ 56 billion worth of semiconductors to others and consumes $ 36 billion on its own. And still, it may have to postpone the launch of one of its products," says Campling. One of the Samsung executives, Koh Dong Jin, who also heads the mobile communications division, highlighted an important problem, saying that there is a "serious imbalance" in the hierarchy of who receives limited supplies of chips.

Car manufacturers, which reduced orders for chips due to falling car sales last year, now found themselves at the end of the queue when they tried to restore the usual volume of orders. The entire global automotive industry buys about $ 37 billion worth of chips, while the largest players, such as Toyota and Volkswagen, spend more than $ 4 billion each, which makes them relatively small consumers for semiconductor suppliers.
"Cars suffered the most because they were the "last at the party"; if Apple spends $ 56 billion a year and the turnover will grow, who are you going to sell to first? "- says Campling.

The shortage of chips seems to continue for some time. It can take up to two years to create and launch complex semiconductor manufacturing plants, and manufacturers are in the process of significantly raising prices for the second time in less than a year.

There is no sign that supply will catch up or demand will fall - prices for semiconductors are rising throughout the chain. This will pass and is already passing to us, the end consumers. It is likely that cars, phones, televisions and other smart appliances will not become cheaper. And we know the reasons."

Source - https://www.theguardian.com