Consumers are facing price increases and shortages of products from TVs and cell phones to cars and game consoles, as the global semiconductor shortage grows.
The scarcity of chips, the “brain” within all electronic devices in the world, has been steadily worsening since last year.
Initially, the problem was only a temporary delay in supplies, as factories closed when the coronavirus pandemic first appeared.
However, although production has returned to normal, a further increase in demand driven by the change in habits fueled by the pandemic means that it is now reaching the point of crisis.
Car manufacturers investing in high-tech electric vehicles, the boom in sales of TVs and home computers and the launch of new 5G-enabled game consoles and cell phones have boosted demand.
Even the mighty Apple, a $ 2 trillion company and the world’s largest semiconductor buyer, spending $ 58 billion annually, was forced to delay the launch of the much-lauded iPhone 12 by two months last year due to the shortage.
“Chips are everything,” says Neil Campling, media and technology analyst at Mirabaud. “There is a perfect storm of supply and demand factors going on here. But, basically, there is a new level of demand that cannot be met, everyone is in crisis and is getting worse ”.
Ford recently canceled shifts at two car factories and said profits could be reached by as much as $ 2.5 billion this year due to chip shortages, while Nissan is halting production at factories in Mexico and the United States. General Motors said it could face a profit of $ 2 billion.
Last month, Sony, which along with other console makers has struggled with a lack of inventory last year, said it might not meet the sales targets for the new PS5 this year because of the problem with semiconductor supplies. Microsoft’s Xbox said it expects supply problems to continue at least until the second half of the year.
However, the most telling example of the semiconductor crisis came from Samsung, the world’s second largest buyer of chips for its products, after Apple. Earlier this week, the company said it may have to postpone the launch of its top-of-the-line smartphone due to scarcity, although it is also the world’s second-largest chip producer.
“It is incredible that Samsung sells $ 56 billion of semiconductors to third parties and consumes $ 36 billion of them, and may have to delay the launch of one of its own products,” says Campling.
Samsung’s co-chief executive, Koh Dong-jin, who also runs his mobile business unit, highlighted a significant issue saying that there is a “serious imbalance” in the hierarchy of those receiving limited chip supplies.
Carmakers, who cut chip orders while vehicle sales dropped last year, found themselves at the end of the queue when they tried to place new orders when the market rebounded. The entire global automotive industry buys about $ 37 billion in chips, with the largest players, such as Toyota and Volkswagen, spending more than $ 4 billion each, which makes them relatively small for semiconductor suppliers.
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“The cars were most affected 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 going to first? ”Says Campling.
The chip shortage looks set to persist for some time. It may take up to two years to get semiconductor factories up and running, 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 is increasing or decreasing demand, while prices are rising throughout the chain,” said Campling. “This is going to pass on to people on the street. Expect cars to cost more and phones to cost more. This year’s iPhone will not be cheaper than last year. “