Semiconductor chips are the brain of every electronic device and so chip manufacturers tend to be in really high demand, and that was before the ongoing COVID-19 pandemic affected everyone across the world. Now, under extreme stress and demand, the global chip shortage has now reached a crisis point, says analyst.
“Chips are everything,” said Neil Campling, a 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.”
That is certainly true, as demand for electronic devices has surged in lockdown. Anywhere from brand new TVs, to next-gen gaming consoles, 5G smartphones and of course, all new graphics cards, have all seen a major increase in demand.
Previously, an analyst at J.P. Morgan said that “semi companies are shipping 10% to 30% below current demand levels and it will take at least 3-4 quarters for supply to catch up with demand and then another 1-2 quarters for inventories at customers/distribution channels to be replenished back to normal levels.”
The initial issue started when the pandemic hit, as factories had to close down temporarily to avoid spreading the virus. But since then, not only have semiconductor companies had to catch up, but they’ve also seen an increase in demand as mentioned above.
Even Apple, who are the largest buyers of semiconductors (who recently bought up all of the 3nm process nodes at TSMC for this year) had to delay their much anticipated iPhone 12 last year by 2 months due to the shortage in chips.
Car manufacturers like Ford and Nissan have reported projected losses of $2 billion or more in profits this year due to the shortage in chips alone. Both Sony and Microsoft have also been hit with the chip shortage because of their new consoles. Sony says they won’t be able to hit their sales target this year, whilst Microsoft said their issues with supply will last until at least the second half of this year.
Samsung, the second-largest buyer of semiconductors in the world (behind Apple) as well as the second-largest producer of chips for their own products, had to postpone their launch for their high-end smartphone earlier this week.
“It is incredible that Samsung sells $56bn of semiconductors to others, and consumes $36bn of them itself, finds it may have to delay the launch of one of its own products,” Campling said.
Apparently, according to Koh Dong-jin, the co-Chief Executive at Samsung, there is a “serious imbalance” when it comes to who is getting prioritized for the limited amount of available chips. Car manufacturers especially have been hit the worst as they are at the bottom of the list, despite spending a total of around $37 billion per year on chips.
“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?” said Campling.
The worst part is that the shortage in chips is going to last for a long while still, and so semiconductor companies are looking to raise prices for their chips for the second time in less than a year:
“There is no sign of supply catching up, or demand decreasing, while prices are rising across the chain,” Campling warned. “This will cross over to people in the street. Expect cars to cost more, phones to cost more. This year’s iPhone is not going to be cheaper than last year.”
All this means we may be looking at another price rise for graphics cards and PC hardware for the RTX 30 series, RX 6000 series, and the Ryzen 5000 series, even if supply seems to be getting better for the latter. Once again, all the more reason that 2021 is not the year to upgrade your PC.
What do you think? How do you feel about the global chip shortage at the moment? How do you feel about raised prices for PC hardware again? Are you happy to wait longer for hardware to reach normal MSRP? Or will you have to bite the bullet and spend more? Let us know your thoughts!