First published in the Daily Maverick 168 weekly newspaper.
Technology has reached its tentacles into so much of our lives that the shortage caused by the pandemic has this strange knock-on effects in such vastly different industries as automation and telecoms.
Ardent gamers desperate for their new Xbox or PlayStation consoles are similarly affected – and arguably the most vociferous (and deeply hurt) of those deprived of their new goodies.
Last week it was the turn of Foxconn, the Taiwanese-outsourced powerhouse that makes Apple’s mobile devices, among others, that warned it would be affected by the global shortage.
Foxconn has issued a forewarning that it expects a 10% decline in its products – read 10% fewer iPhones – and there is a significant knock-on effect for the rest of the industry too.
The chip shortage forced Apple to delay its launch of the iPhone 12 by two months last year.
Apple is the largest purchaser of semiconductors, on which it spends $58-billion every year.
“Chips are everything,” says media and tech analyst Neil Campling from Mirabaud Securities Limited.
“There is a perfect storm of supply and demand factors going on here. But basically, there is a new level of demand that can’t be kept up with, everyone is in crisis and it is getting worse.”
Apple’s archrival in the smartphone segment, Samsung, is also the biggest chip-maker in the world – and Apple buys a huge portion of its components from the South Korean powerhouse.
“There’s a serious imbalance in supply and demand of chips in the IT sector globally,” says Samsung’s co-chief executive Koh Dong-Jin.
The shortage was exacerbated by – of all things – fierce winter storms in Texas. Most people will be scratching their heads wondering, why Texas?
The Lone Star State is home to an enormous tech industry. Its capital, Austin, where the annual South by Southwest gathering usually happened before Covid-19, is also the home of Dell computers and SolarWinds, which was at the heart of a major hack of US agencies in 2020.
Texas also has a huge chip-making industry, including a facility owned by Samsung, which was rumoured in January to be considering a $10-billion fabrication plant in Austin. The winter storms, which caused rolling blackouts, therefore hit the Texas semiconductor industry as hard as load shedding by Eskom hits the whole of South Africa.
Part of the shortage problem is also related to former #Presidunce Donald Trump’s trade war with China.
Aware that a ban on American products was in the offing, Huawei bought up all the chips and other crucial components it could.
As I warned at the time, Trump’s executive orders about Chinese firms accessing American technology are ultimately going to backfire on the US because it has hastened China 2025, the emerging superpower’s plan to build its own hi-tech industry.
It has certainly already had a serious impact because Huawei was quite rightly trying to prevent external forces, whatever they were, from affecting its business process. The new US administration, with so many Trump-caused scandals and diplomacy fires to put out, hasn’t said what it will do with these sanctions.
In the meantime, there aren’t enough chips for new phones, new Xboxes and new cars. This demonstrates once again the importance of the global supply chain for the functioning of the world’s economies. DM168
This story first appeared in our weekly Daily Maverick 168 newspaper which is available for free to Pick n Pay Smart Shoppers at these Pick n Pay stores.
It would take you an average of 76 eight-hour work days to read through all the terms and conditions you agree to per year.
Daily Maverick © All rights reserved