Global chip shortage continues to wreak havoc on supply chains

17 May 20211.22k Views

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The global shortage of semiconductors has impacted the supply of cars and computers already, but job losses and price hikes are also on the cards.

The worldwide chip shortage continues to haunt virtually every industry that requires a semiconductor in its manufacturing process.

One of the hardest hit industries has been the auto sector, which is set to lose $110bn in revenues this year, according to a new analysis from AlixPartners. This is almost twice as much as previous estimates of $60bn.

But it’s not just revenues and supply that automakers need to worry about. Stellantis, the car company formed by the merger of Fiat and Peugeot, said it’s cutting more than 1,600 jobs at its Illinois Jeep plant in a move to “balance sales with production” of the Jeep Cherokee, which is made there.

Earlier this month, the company’s chief financial officer Richard Palmer said that while he expects the shortage to improve later this year, it will possibly leak into 2022. “I think it would be naive to expect it to just disappear,” he said.

His prediction falls in line with many other industry leaders, including Intel CEO Pat Gelsinger who last month said the shortage may take “a couple of years” to sort out.

Outside of the auto industry, manufacturers of computers and other electronic devices have been seeing the impact of the shortage.

Speaking to analysts following Apple’s latest earnings report, the iPhone maker’s chief financial officer, Luca Maestri, predicted a loss of between $3bn and $4bn in sales in the current quarter due to limited supplies of certain chips.

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Consumer prices are also now being affected. According to market research company NPD, the price of larger television models has shot up by around 30pc compared to last summer due to the supply issues caused by the chip crisis.

Some companies have already flagged price hikes, including Taiwanese computer maker Asus and Synaptics, a company that develops various hardware and software including touchpads for computers.

Help on the horizon

While the current chip shortage will take time to rectify, there have been several major investments and strategies announced to stem the current issue and protect the industry from future shortages.

The latest investment comes from South Korea, which last week unveiled its plans to spend around $450bn to build the world’s biggest chipmaking base over the next decade, in an investment led by Samsung Electronics and SK Hynix.

It follows several other boosts from industry players, including a $20bn investment in two new Intel fabrication facilities in Arizona and a $100bn investment by TSMC to boost its manufacturing capacity.

In terms of long-term plans, the EU has already started looking at how it can reduce its dependency on the US and Asia for semiconductors.

Having already set out ambitions for Europe to manufacture one-fifth of the world’s semiconductors by 2030 as part of a new 10-year strategy, the EU has also been considering creating a semiconductor alliance with STMicroelectronics, NXP, Infineon and ASML.

Meanwhile, Reuters reported last Friday (14 May) that US senators were on the cusp of striking a $52bn deal that would significantly boost US chip production and research over the next five years.

Jenny Darmody is the deputy editor of Silicon Republic

editorial@siliconrepublic.com