The lack of electronics – what is it, how is it manifested and is it really there?
The shortage of electronics has been throwing both electronics manufacturers and us, ordinary buyers, out of balance for a year now. Electronics prices go up every month or season. Some niches suffer more from this, others less. The shortage of chips had a strong impact on the cost of video cards, which increased several times over the year. The increased demand for smartphones, computers, smart TVs, cars, tablets and other electronics is not helping to stabilize their prices. Unfortunately, we are now talking only about one of the areas of the global crisis, the tip of the iceberg, and future prospects are not very encouraging.
What are we talking about?
Today, manufacturers are in dire need of semiconductors and, as a result, chips. You know that modern CPUs and video cards accommodate 1 billion transistors. They are needed everywhere. Everything that knows how to “think” needs such semiconductors, and they are in short supply. Today the largest semiconductor manufacturer TSMC occupies 54% of the market, followed by Samsung with 17% of the market. The income of the companies, and, accordingly, their shares on the world stock exchange, can be seen in the photo.
At an analytical agency TrendForce at the beginning of the year, it was considered that the real demand for the production of microcircuits was not satisfied, the deficit was about 30%. And this despite the fact that the annual capacity growth is 20%. V Susquehanna Financial Group found out that the pandemic worsened the situation as manufacturers began to fall behind schedule in the first 4 months of 20201. Even large corporations are forced to wait up to 4 months for a microcircuit, and small companies – up to 1 year, and sometimes they refuse completely.
Here the law of the market is very clearly visible, because the increased demand pushed more than 30 manufacturers to raise prices for products by an average of 20%. Moreover, in some directions, prices soared 10-30 times. In turn, the market leader TSMC has already announced that it prioritizes processors for Apple and automakers. All others will receive components as they are manufactured.
Interesting Semiconductor Deficiency Facts:
- Despair is the best description of the case for automakers who are losing about $ 100 billion from a lack of chips. Prices have also increased on the secondary market, and a car with a minimum mileage already today costs $ 2000-5000 more than a new one, which cannot be bought. True, this is more true for the markets of Europe and the United States.
- “The time when I make an accurate forecast for customers for the production of microcircuits will be the only one this year,” said the semiconductor manufacturer. Such a big gap between the required and the current level of supply of chips.
- “The average waiting time for electronic components for companies is 22 weeks” – reports LevaData…
- “Discrete semiconductors and capacitors are in the biggest shortage. Some memory components have to wait a year, ”the report says. ECIA…
- “Samsung will install Unisoc in its line of budget-level smartphones and tablets” – the point is just a shortage of components. Previously, they could be found mainly in devices from unknown Chinese manufacturers. Samsung also had it, but never used it in such large quantities.
In fact, there have been positive shifts for the better in recent months. It seems that the lagging level has begun to stabilize, and sometimes even decrease slightly. Compared to the ever-increasing delays in the first half of the year, the situation is improving, but it will definitely affect 2022.
Why is there a shortage of microcircuits?
As often happens, the problem is in the layering of a number of factors:
- Increase in the cost of electricity… The point is its shortage, because everything around uses energy, including factories that work 24/7 to meet increased demand. Its supplies are constantly under stress, now coal runs out, gas is stopped from some countries, etc. For example, the price for 1 megawatt in mid-2020 was 17-18 euros. In the first quarter of 2021, the cost increased to 120 euros. The original schedule can be viewed at link…
- Rising energy prices in wholesale… The increase in wholesale prices for energy (gas and electricity) in Europe since 2019 is 230%, although for the population – only 7%. People do not yet feel the change in the situation, but it is already in the red zone, since sooner or later prices will have to be raised. Poverty reduction policies cannot last forever.
- Large capacity redundancy… Samsung and Apple have taken the path of building up their own stocks of components for the year ahead. In this way, they are insured against the deficit. But there is one more thing, thus creating an even greater lack of components among other companies. This leads to the extinction of small producers.
- Inflation… Official inflation in dollars reached a record in 13 years – 5.2%. The depreciation of money forces companies to spend it rather than accumulate it. Manufacturers with a lot of free money are willing to buy components in advance.
- US-China trade war… The refusal of the United States and American companies from the services of Chinese manufacturers is costly to both sides.
- A sharp rise in the cost of metals and minerals… For example, the price of an alloy of praseodymium with neodymium has doubled over the year (used for the production of speakers). The cost of aluminum has risen to a maximum over the past 13 years – $ 3200 per ton, and this is still not profitable for producers. Factories are closing. There are still many such elements, including silicon.
- China’s commitment to reducing harmful emissions… As a result, power outages at factories, forced production cuts. The same silicon, the government demanded to produce 90% less at some plants, as a result – a sharp increase in its cost.
- Increased demand… During the quarantine and the pandemic, coupled with the depreciation of the ruble, the demand for household appliances and electronics increased dramatically.
When is the situation expected to improve?
The rope around his neck is tightened so tightly that it cannot be quickly untied. It will take some more time for the market to normalize. Demand will continue for 2022. Plus, only then will many manufacturers be able to see dramatic reductions in semiconductor manufacturing delays. Now they are beginning to solve the problem by building new factories. It takes 1.5-2 years to launch them.
At the same time, prices for electronics and any “smart” systems will continue to rise. And yet people will continue to spend money as they will see their purchasing power decrease steadily. This is the best shopping incentive.
2023-2024 promises to be more stable. First, the prices of goods will already be high, which should repel buyers. And over the past years, a lot has already been bought, a kind of stock has been formed. Plus, the deficit has already gone and even a surplus has appeared. Falling energy prices and surplus semiconductors (due to increased production and decreased demand) can help bring down the price. Although it may not return to the pre-crisis level. Before this period, it is unlikely that everything will be the same.