“The Chip Crisis will continue into 2022”. Serious warning from Taiwan
Taiwan-based chip giant Semiconductor Manufacturing Co. (TSMC) now warns that the global chip shortage could extend into next year. TSMC has not ruled out the possibility that there is an "overbooking or inventory creation problem," Bloomberg reported, but the chip giant said in its most recent conference call that "the shortage will continue throughout the year and could be also extended to 2022 ".
The over-demand crisis has been present in this sector for months. This month alone, suppliers such as Japan's leading chip maker, Shin-Etsu Chemical Co. Ltd. have raised prices between 10% and 20%, according to to Caixin, who reported rising commodity costs and supply disruptions could be a continuing tide to drive prices up.
Fine electronics manufacturer Jiangsu said its suppliers have raised prices five times since the second half of 2020. The increases represented a total increase of between 30% and 40%, including a new 10% increase that entered. force last week. The company's warehouses are then halfway through the normal production level, Caixin said.
Who is behind this crisis? We have a Chinese problem, for now of consumption. Smartphone sales in China had increased by 67.7% in March despite poor supply, all certified by the China Academy of Information and Communications Technology. Furthermore, the auto industry in China has also returned to pre-pandemic levels, and cars, especially hybrid or electric, are large users of silicone chips, as we know from the supply crisis in the US.
The companies in the sector do not stand still. TSMC is investing heavily to increase its production capacity:
Earnings of the Taiwanese firm also grew almost exponentially
While investments may be fast in making the chips, at the same time they cannot increase production capacity instantly. However, there is a delay and this is leading to the explosion of prices.
The current situation presents two extremely different dangers:
- from an economic point of view, paradoxically, an excess of current investments can be created which in the future can lead to a drop in the prices of the chips themselves, with a medium-term time horizon. If chips are a commodity, like oil, they risk following boom-bust cycles;
- from a political point of view, the danger increases that China will decide to increase the production of its semiconductors simply by annexing the largest world producer, Taiwan. Political tensions could arise on the basis of economic factors.
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The article "The Chip Crisis Will Continue in 2022". Serious warning from Taiwan comes from ScenariEconomici.it .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/la-crisi-dei-chip-continuera-nel-2022-grave-avvertimento-da-taiwan/ on Fri, 16 Apr 2021 07:10:03 +0000.