Will Computers Become Scarce Over A ‘Global Chip Shortage’ Now?

By admin On Dec 18, 2020

For a while, I have noted that the disruption of supply chains caused by COVID is a bid matter and will have major consequences for the future. I have covered disruptions such as to the tool industry or shipping containers from China, based on the production times involved, but according to Reuters, most major electronics are now in a potential shortage as due to the pandemic (as it is being attributed), there may be a coming ‘global microchip shortage’.

Makers of cars and electronic devices from TVs to smartphones are sounding alarm bells about a global shortage of chips, which is causing manufacturing delays as consumer demand bounces back from the coronavirus crisis.

The problem has several causes, industry executives and analysts say, including bulk-buying by U.S. sanctions-hit Chinese tech giant Huawei Technologies, a fire at a chip plant in Japan, coronavirus lockdowns in Southeast Asia, and a strike in France.

More fundamentally, however, there has been under-investment in 8-inch chip manufacturing plants owned mostly by Asian firms, which means they have struggled to ramp up production as demand for 5G phones, laptops and cars picked up faster than expected.

“For the whole electronics industry, we’ve been experiencing a shortage of components,” said Donny Zhang, CEO of Shenzhen-based sourcing company Sand and Wave, who said he faced delays in obtaining a microcontroller unit that was key to a smart headphone product he was working on.

“We were originally planning to complete production in one month, but now it looks like we’ll need to do it in two.”

A source at a Japanese electronics component supplier said it was seeing shortages of WiFi and Bluetooth chips and was expecting delays of more than 10 weeks.

The automotive industry in China, which flagged the issue earlier this month, is anticipating production at some Chinese carmakers to be affected in the first quarter of next year, according to a senior industry association official.

Consumer demand in China, especially for cars, has snapped back unexpectedly quickly from the coronavirus crisis, and orders for products such as laptops and mobile phones in regions still struggling with pandemic restrictions, such as Europe and the United States, have also picked up.

“Since (these products) all compete for the same fab (fabrication plant) resources the shortage is across all of these sectors and others as well. These are just the most apparent right now,” said Kevin Anderson, a senior analyst at Omdia.

Dutch automotive chip supplier NXP Semiconductors has told customers it must raise prices on all products because of a “significant increase” in materials costs and a “severe shortage” of chips, Reuters reported this month.

“Business came back much faster than we expected,” NXP CEO Kurt Sievers told German business daily Handelsblatt in an interview on Dec. 11. “Many customers ordered too late. As a result, we are not able to keep up in some areas.”

Other short-term triggers for the chip shortage include stockpiling by telecoms giant Huawei ahead of mid-September when its suppliers had to comply with U.S. sanctions, CICC analyst Huang Leping said in a note on Dec. 11. (source)

Microchip shortages are not a joke. The world now runs on microchips, and while the US is powerful, he who controls the production and flow of or access to microchips can cause serious damage to any economy.

Imagine if your computer could not work because a part broke, but the part you need to fix it was unavailable for political reasons. That is the situation that we are looking at here with a ‘microchip shortage’, because if the computers cannot run, the machines that run society cannot do the work they nee to do in order to have society work, an as a result, bad things happen.

Many of these chips are made in China. A significant number are done in Japan and increasingly Vietnam, India, Philippines, and other nations, but the Chinese ‘lock’ on this market is, from a strategic perspective, rather to be noted.

One therefore should expect to see chip prices increase, as well as computer parts. Likewise, expect to see a strong push for increased diversification from China into other markets for chip production, and that this would be done quickly, in order to prevent serious, long-term, and potentially nation-wrecking consequences.