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Chronic Chip Shortages Set To Get Worse

Chronic shortages of processors is not only affecting consumer electronics and appliance retailers in Australia it’s also impacting the audio and custom install channel with supply now running out for manufacturers who placed orders 18 months ago.

This potential shortage saw Apple earlier today forecast a downturn in sales for 2021 and 2022.

Also affected are automotive distributors in Australia, who have taken to jacking up prices and then threatening customers who had been waiting months for a new vehicle that they would on sell the ordered vehicle unless they pay the increased price.

According to sources the shortage is having a sweeping impact on a wide range of sectors especially gaming machine and premium PC manufacturers who are now having to order 12-18 months in advance just to get stock.

Last week, German automakers Daimler and BMW were forced to temporarily slow down or halt assembly lines, citing the global semiconductor drought.

The computer industry is confronting major problems as the work at home user moves to upgrade their systems.

Apple Acer, Lenovo, Dell and Samsung Electronics have all confirmed that processor shortages is affecting production in a way that could lower sales of their products in Australia while also impacting technology retailers.

The problem has come at a bad time due to a robust demand for smartphones, laptops and game consoles during the pandemic, major manufacturers ramped up orders, but supply turned out to be far lower than the pent-up demand resulting in brands now facing critical shortages of key products in Australia.

According to audio distributors the same problem is confronting them with receivers, amps and speakers in short supply due to a shortage in chip supply.

Experts claim the chip shortage is expected to continue, as it takes time for chipmakers and parts manufacturers to set up new factors and customize systems, experts said.

“The chip production volume is likely to reach a full capacity in the third quarter to meet the surging demand,” said Jeon Byeong-seo, a professor at Kyung Hee University in Korea where the likes of Samsung are tipping billions into new manufacturing plants both in Korea and the USA.

“Supply will be much lower than growing demand from automakers, smartphone and electronics manufacturers.” he said.

Jeon said there are just five or six chipmakers capable of producing the latest cutting-edge semiconductors. Even if they build up production capacity now, it will take at least six months before they can put out the chips, and around 50 parts makers have to customize the chips, extending the period before chips get distributed in the market.

Currently, US tech companies are at the forefront of developing new semiconductor technologies, but the production is largely done by chipmakers in Korea, China and Taiwan.

These Asian countries are not only the key production bases, but also the chief buyers of final products that contain the chips needed for products being shipped to Australia.

The bottleneck clogging the entire supply chain of semiconductors, will not be resolved unless companies find a solution to iron out the key issues”, Jeon said.

While the US is building six semiconductor plants from this year through next year, China and Taiwan are each setting up eight plants during the same period.

Korea and Japan are set to build two factories each. Out of 29 factories, 15 are semiconductor fabrication plants, or foundries.

The smartphone industry has handled the chip shortage problem relatively smoothly, largely because major manufacturers tend to secure the inventory of key parts in advance, a practice that helps them continue production for around six months without worries about sudden disruptions.

But such inventory is also feared to hit a bottom in the coming months as the chip shortage continues for longer than expected, industry watchers said. According to media reports, some manufacturers are cutting down on production volume, while jacking up prices to shore up their profits.

Market researcher Strategy Analytics said that the global average of smartphone’s wholesale prices rose by 5 percent in the second quarter of this year, marking a significant rise from about 2 percent increase in the past years.

Google’s decision to launch its newest smartphone model only in the US and Japan also signals that processors are in short supply. Samsung Electronics earlier denied rumours about the discontinuation of the Note series, saying it will not be produced this year due to the chip shortage.

For smartphone makers, the shortage involves not only power management but also display driver and application processors. Chips related to LTE and 5G solutions are also being affected.

Analysts said the global shipment of smartphones would inch up by a mere 1.3 percent to 771 million units in the second half of this year, little changed from the year-earlier period.

Industry sources said smaller electronics makers could face problems in securing chips if the semiconductor shortage continues.

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