global-chip-shortage-and-its-impact-on-industries

The impact in tech industry of Global Chip Shortage

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In the last six months, the global chip shortage has intensified, worsening the crisis in the supply of automobiles, televisions, computers, and mobile devices. The shortage of chips, as well as its immediate effect on industries, has become more visible. Automobiles, gaming, televisions, and have all been affected by the impact.

WeR7;ll look at how the shortage of processors, or the brains of computers, has impacted various industries in this article. Continue reading.

Since the spring of 2020, there has been a problem, but the global chip shortage has now become the worst fact. Following the pandemic, the global supply chain was in short supply. Automobiles, computers, and cell phones all rely on semiconductors. However, as things stand, the manufacturing houses will lose $60 billion this year due to a shortage of chips.

Due to Covid-19’s forced lockout, the crisis was only temporary at first. People’s demands for gadgets and the internet, on the other hand, are skyrocketing. As a result, even though chip production has returned to normal, the semiconductor industry is racing against the clock to meet the unprecedented for device’s “brains.”

What Caused the Demand for Chips to Rise?

It would be unfair to blame COVID-19 solely for the global chip shortage. The pandemic has increasingly thawed. Semiconductor output has also returned to normal. Electric vehicles, smart TVs, game consoles, and smartphones, on the other hand, are in high demand.

People’s reliance on smartphones has increased since the pandemic. There are now even more gadget requests than ever before. The demand and supply structure of chips and end products have clashed with people’s appetite for more gadgets for comfort. Major industries are now being forced to stop or even cancel production. Let’s look at how the global chip shortage is affecting various industries.

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Demands for Automobiles

Cars require semiconductors to control the engine and the vehicle’s overall performance. Without a sufficient supply of chips, manufacturing would stall. This is why the bulk of the automotive factories are actually idle.

Due to the lack of chip, Ford recently canceled two car plants and said profits could drop by $2.5 billion this year. Meanwhile, Nissan, the Japanese automaker, is reducing production in Mexico and the United States. Owing to the scarcity of chips, General Motors has expected a $2 billion loss.

Similarly, Honda, Toyota, and other automakers have all stopped production for several weeks due to a shortage of chips.

According to analysts, global vehicle production could drop by up to 1.5 million units this year.

Consoles for gaming

Gaming consoles are one of the most common additions to any room. They provide with a lot of fun and multipurpose functionality for our pastime. It’s a multibillion-dollar company. The gaming industry is expected to be worth $197.7 billion by 2020. However, the is wreaking havoc on them as well.

Sony, the Play Station’s manufacturer, anticipates a revenue loss. On the other hand, Microsoft, its nearest rival, is in the same boat. They also expect the chip supply shortage to last until the second half of next year, resulting in a loss of profit.

Industry of Smartphones

Smartphones are now the most popular smartphone on the market. In addition, the chip shortage has wreaked havoc on the mobile manufacturing chain.

Samsung CEO Koh Dong-Jin reported in March that there was a “supply and demand imbalance for chips.” He claimed that producing multiple phones in the same year was the most detrimental factor to efficiency.

In response to Samsung’s decision to cancel the Note Series for 2021, the company’s CEO had the following to say.

In our market portfolio, the Note series is placed as a high-end model. It may be difficult to release the Note model in 2H due to the pressure of releasing two flagship models in a year. The Note model’s release date is subject to change, but we plan to release one next year.

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If Samsung, a global empire of electronic gadgets (including phones), is having trouble meeting chip demand for its goods, it is a dire warning to all industries around the world.

Samsung is the chip’s second manufacturer and purchaser. However, due to a shortage of chips, it was forced to postpone the launch of its high-end Galaxy Note Series.

According to statistics, Samsung sells $56 billion in semiconductors to other firms and uses $36 billion in its own devices. However, they were forced to cancel their much-anticipated device this year, which is highly telling.

Xiaomi, a mid-range powerhouse, has plenty of them. Xiaomi and other Chinese brands increased production to escape market supply at the end of last year, after the United States slowed Huawei with layered sanctions. This move put Qualcomm’s chip supply ahead of the output of smartphones, and the rest of the industry is suffering as a result.

What Effect Would a Chip Shortage Have in Nepal?

In terms of the Nepalese market, the global chip shortage may have an impact on increasing goods prices. The Nepalese market is dependent on imports. India is the world’s biggest car exporter. Several plants in India have been shut down due to a chip shortage. As a result, when the final product is finished and shipped, the retail price will also increase.

Due to the prices of steel, iron ore, and spare parts, the car industry has already seen a price increase of 10-15%. The global chip shortage could escalate the situation. Nepal imported transport vehicles and parts worth NRs. 4.71 billion rupees in the current fiscal year, according to the Trade and Export Promotion Centre.

These figures may fluctuate due to the current chip shortage, but it is also possible that vehicle prices may increase.

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However, Nepal’s smartphone industry may be the hardest hit by the chip shortage. In the worst days of the lockdown, despite a weak economy, mobile imports doubled. Phones worth a total of NRs24.06 billion were brought into the country.

People stayed at home as classes moved online, and online activities increased. The end of the grey market during the Covid-19 border restrictions also helped boost the figure.

However, in the coming months, the global chip shortage may have a significant effect on Nepal’s phone markets. Since major phone manufacturers are halting or even ceasing production, there will soon be a shortage of phones, resulting in price inflation.

The Return to Normalcy

The Covid-19 pandemic is slowly dying out. Manufacturing companies are once again exhaling a sigh of relief. The supply chain, on the other hand, is in disarray. Vehicle demand attracts more chips, while other sectors struggle to get their hands on them. Still, the semiconductor industry is struggling to keep up with the demands of the rest of the economy.

“There is no easy way out of this,” says Kristin Dziczek, the Center for Automotive Research’s vice president of business, labor, and economics. Since the demand for fresh chips is and at an exponential rate, getting back to normal will take months. The supply-demand ratio is expected to return to normal in the second half of next year.

What are your thoughts on the effect of the pandemic on chip production? Do you agree that the current supply chain needs to be reformed in order to prevent potential disasters? Please share your thoughts in the section below.

This article is referenced from Nepali Telecom


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