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Global Chip Shortage Foreshadows Rise in Electronics Prices

(Noted News) — Manufacturers of smartphones, televisions, and other electronics are facing delays in production due to a shortage of semiconductors as demand for their products rebounds from the coronavirus shutdowns during the holiday season, suggesting a coming rise in consumer electronics.

The shortage of semiconductors stems from a number of causes creating a worldwide crisis affecting multiple arms of the electronics industry.

In October of 2020, a 2-day long fire hit the Asahi Kasei Microsystem (AKM) factory in Nobeoka City, Japan, ravishing the entire building and affecting the global supply chain for over 10 of the widely used chips for hi-fi, home cinema, and Bluetooth devices. AKM is one of the largest chip factories in the world and will take 6 months to get back to its regular production. Both Panasonic Corp and Yamaha Corp have stated they have been affected by this fire.

Facing U.S sanctions, smartphone giant Huawei Technologies has been adding to the strain on the market by buying up chips in bulk, attempting to stockpile as much as they can before having their access to U.S. manufacturers cut off. This raised smartphone prices in China by 400-500 yuan in September.

Frank Huang, (黃崇仁), CEO of Chinese chipmaker Powerchip Semiconductor Manufacturing Corp, announced a hike in chip prices because of the shortage, and that he expected the shortage to get progressively worse into next year due to the mass adoption of 5G related technologies. The company expects the shortage to cause a rise in prices for smartphones, tablets, laptops, and more.

“The supply crunch has panicked customers. Foundry capacity will become a battleground for chip designers in the next five years. We have to adjust chip prices in response to the market situation.”

Earlier this year, chip factory workers demanding salary increases in Italy and France went on strike pausing production in one of the most important areas for chip manufacturing, particularly for advanced technologies, intellectual property (IP), and digital manufacturing systems. 

On top of all of this is of course the coronavirus restrictions that halted demand initially, but it has now bounced back quicker than supply chains were able to react to. This prompted a surge in consumer demand in China, especially for cars, and in the U.S. and Europe for laptops, smartphones, and other electronics. 

According to Independent Commodity Intelligence Services (ICIS), China’s auto industry will have to wade through this chip shortage until well into 2021. 

“In short supply are mainly the electronic control unit (ECU) and microcontroller unit (MCU) from key European producers such as Dutch-based NXP Semiconductors and German firms Continental and Bosch, as the spike in demand in China since the second quarter from a pandemic-induced slump took most chip suppliers by surprise.”

Kevin Anderson, senior analyst at Omdia, told Reuters that though some industries are showing more obvious signs of pain than others, and that the shortage will virtually affect all sectors.

“Since (these products) all compete for the same [fabrication plant] resources, the shortage is across all of these sectors and others as well. These are just the most apparent right now,” 

Continental, a German auto part supplier, said in a statement that the recent rebound in Chinese demand will cause a supply chain bottleneck not likely to dissipate till 2021.

“Although semiconductor manufacturers have already responded to the unexpected demand with capacity expansions, the required additional volumes will only be available in six to nine months.”

President-elect Joe Biden is expected to reverse much of the industrial cold war instigated by President Trump, but even if that is all done immediately, the damage done to the semiconductor industry will likely leave long term effects in the American market rippling out for months or years. 

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