The growing semiconductor chip crisis has extended to smartphone, television, and home appliance manufacturers from rising stockpiling, Financial Times reports, based on Asian manufacturers.
What Happened: The pandemic-induced demand spike in electronics and production facility outages further squeezed the chip supplies.
Stockpiling of the Chinese companies affected by U.S. embargoes in anticipation of further restrictions played an important role.
All of the above translated into a chip crisis for everyday electronics like washing machines and toasters, affecting the likes of South Korea’s Samsung Electronics Co Ltd SSNLF and LG Electronics Inc LGEIY LGEJY. The manufacturing delays are estimated to last until 2022.
Samsung reduced orders for some smartphone components in April after its warning regarding grave supply and demand disparity for semiconductors.
Supply crisis in application processors, display drivers, and camera sensors led to falling orders from Samsung in the current quarter.
The scenario was expected to improve from the bulk volume of the delayed orders in the second half.
Why It Matters: Samsung’s mobile business Co-CEO warned regarding possible problems from the chip crisis in the second quarter, including the possible postponement of its high-end smartphone launch until next year.
LG was closely tracking the situation as they were also vulnerable to production disruption risk.
TV makers had to hike prices due to rising material costs based on a small TV maker from Seoul.
Production of low-margin processors for washing machines or toaster was affected due to the crisis of microcontroller units and manufacturers’ focus on high-margin products.
South Korean foundries failed to meet the demand surge despite the entire capacity operation.
Smartphone, TV, and other home appliance chip demand surpassed the manufacturing capacity of Apple Inc AAPL supplier DB HiTek following supply crisis of display driver chips, power management chips, and image sensors.
The crisis led to order placement with multiple chipmakers.
Taiwan Semiconductor Manufacturing Co Ltd TSM operated at over 100% capacity and expected the chip crisis to loom until 2022. TSM earmarked $100 billion over three years for capacity expansion.
Taiwan’s memory chip maker Nanya Technology Corp NNYAF announced plans to build a $10 billion plant to control the crisis and tap the growing demand for 5G-related components.
Analysts expect the crisis to be resolved once the electronics spend declines with the pandemic withdrawal, defining the real demand and induced demand.
Price action: TSM shares traded higher by 1.91% at $120.91 on the last check Monday.
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