Logo of Phnom Penh Post newspaper Phnom Penh Post - Global chip shortage continues

Global chip shortage continues

Content image - Phnom Penh Post
US tech companies are at the forefront of developing new semiconductor technologies, but the production is largely done by chipmakers in South Korea, mainland China and Taiwan. FREEPIK

Global chip shortage continues

The prolonged global semiconductor shortage is having a sweeping impact on a wide range of sectors ranging from cars and computers to smartphones and gaming devices.

South Korea, home to major chipmakers and tech players, is keen to soften the effect, but the outlook remains mixed, experts said.

Last week, German automakers Daimler and BMW were forced to temporarily slow down or halt assembly lines, citing the global semiconductor drought. Automakers elsewhere faced similar disruptions caused by the chip scarcity, with many factories yet to reopen and customers waiting weeks to get their cars.

Experts said the disruption is wiping out the chance to make up for losses carmakers had to swallow in the aftermath of the Covid-19 outbreak, as demand rebounds from the downturn sparked by the pandemic.

The automakers had to cut the purchase volume of chips used in cars after the Covid-19 pandemic hit the world, projecting a steep decline in demand. Now that vaccination rollouts are underway around the world, demand is bouncing back strongly, which in turn worsens the chip shortage situation.

The computer industry is confronting the same problem. Apple and Samsung Electronics earlier said the chip shortage is affecting their production in a way that could lower sales of laptop and desktop computers.

Noticing a robust demand for smartphones, laptops and game consoles during the pandemic, major chipmakers ramped up related production, but supply turned out to be far lower than the pent-up demand.

The chip shortage is expected to continue, as it takes time for chipmakers and parts manufacturers to set up new factors and customise 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. “But supply will be much lower than growing demand from automakers, smartphone and electronics manufacturers.”

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 customise 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 South Korea, mainland 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.

The bottleneck clogging the entire supply chain of semiconductors, therefore, will not be resolved unless companies find a solution to iron out the key issues linked to Asian players, 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. South 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 the global average of smartphones’ wholesale prices rose by five per cent in the second quarter of this year, marking a significant rise from about two per cent increase in the past years.

Google’s decision to launch its newest smartphone model only in the US and Japan also signals that chips 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 per cent 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.

THE KOREA HERALD/ASIA NEWS NETWORK

MOST VIEWED

  • Purging Sihanoukville’s past with a new masterplan

    Amid illicit activities, haphazard development and abandoned projects, the coastal city of Sihanouk province needs a reset to move forward. A new masterplan might be the answer to shake off its seemingly mucky image to become the Shenzhen of the south Gun toting, shootouts, police

  • Chinese may be first in tourism revival: PM

    Cambodia's tourism industry is gearing up to roll out the red carpet for Chinese travellers after Prime Minister Hun Sen on September 17 indicated that the Kingdom could soon throw open its doors to international holidaymakers vaccinated against Covid-19 – starting with guests from China. Cambodia Chinese

  • Four-pillar approach in reopening of tourism: PM

    Cambodia is drawing up a four-strategy approach to promptly restore domestic and international tourism activity and put the industry on a transition pathway to a sustainable and inclusive model that is resistant to future crises, according to Prime Minister Hun Sen. The prime minister made

  • Airline says ready for green light to reopen international tourism

    Sky Angkor Airline Co Ltd on September 21 said it is ready to transport South Korean and Chinese tourists to the Kingdom once the Cambodian government makes good on plans to reopen its borders to vaccinated travellers. The Siem Reap-based airline made the remark during a

  • Tourism concerns laid bare

    To ensure the success of plans to reopen the tourism market for international visitors, Cambodia must pay utmost attention to two primary determinants – the ongoing paradigm shift in domestic tourism services towards the ‘new normal’, and the factors influencing choices of destinations among foreign holidaymakers.

  • Cambodian bride ‘badly treated, held captive’ by Chinese man seeks help

    A Cambodian woman who travelled to China to marry a Chinese man there was “badly treated” by her husband’s family and then had to be rescued and will be returned to Cambodia to ensure her safety. The rescue operation came about after the 25-year-old