Chips

Because Of Chip Shortage Crisis, The Entire Market Changes

chip shortage

All kinds of digital products are facing price rises. The chip shortage crisis touches all industries from TVs and smartphones to game consoles and even cars.

Everything has begun in 2020, when the chip manufacturing factories had to close the doors because of COVID-19 pandemic. On the other hand, many product niches, such as tablets, computers, TVs, etc., became quite popular conditioned by the lockdowns in almost all countries. So the digital products market couldn’t get chips but had to sell more products.

At the moment, the chip production has returned to its normal capacity, people’s habits have changed. And what was normal before is insufficient now.

“Chips are everything,” says Neil Campling, media and tech 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 can’t be kept up with, everyone is in crisis and it is getting worse.”

Even Apple And Samsung Affected A Lot

Apple, which is a $2tn company and the world’s biggest buyer of semiconductors, has been forced to delay the launch of the iPhone 12 by two months because the suppliers couldn’t deliver a necessary amount of chips in time. And we should also note that the Cupertino-based company spends over $58bn annually.

But we should focus on another manufacturer, Samsung. It is the world’s second-largest buyer of chips for after Apple. And what’s more noteworthy, it is also the second-largest chip maker in the world. This week, the South Korean company said likely it will postpone the launch of its high-end smartphone due to the shortage.

As Campling reported, Samsung sells $56bn of semiconductors to others and consumes $36bn of them itself. So if Samsung is going to postpone the launch of the Galaxy S series, it indicates what a serious problem we are dealing with.

Prior to this, last month, Sony announced that because of the chip shortage it won’t hit sales targets for the new PS5 this year. Its closest rival Microsoft is in an identical situation and thinks supply issues continuing at least until the second half of the year.

Car Makers Have To Postpone Their Products As Well

Modern cars use too many technologies in their cars. The electric cars took this to a level higher. So they drove demand as well.

Say, recently, Ford cancelled shifts at two car plants and said profits could be hit by up to $2.5bn this year due to chip shortages. General Motors said it could face a $2bn profit hit.

Moreover, it turns out car manufacturers are at the back of the queue. But it’s not fair. We mean the entire global car industry buys about $37bn worth of chips. There are two big players in face of Toyota and Volkswagen that spend more than $4bn each.

 “The worst affected have been autos because they were last to the party; if Apple is spending $56bn a year and growing who are you going to keep supplies going to first?” says Campling.

Conclusion

Obviously, the chip shortage will persist for some time yet. Many analysts think it will take two years. But before this happens, manufacturers are raising prices for the second time in less than a year.

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