PlayStations and iPhones can be expensive, thanks to microchip shortages

Prices of popular gadgets such as PlayStations and iPhones may rise due to a lack of microchips caused by a “perfect storm” of coronavirus-driven demand, supply chain disruptions and trade war storage, experts warn.

In the months after the pandemic hit, people stuck at home went on a spending spree to buy goods, including extra monitors, new computers and tablets – each running on key chips.

Tensions between the US and China are compounded – Huawei stored semiconductors last year before US sanctions aimed at cutting off the technology giant from global chipmakers kicked in, adding further pressure on supplies.

The pressure in the market was highlighted when car manufacturers, who enjoyed admission to car purchases, tried to obtain specialized semiconductors, only to find the manufacturers who had prioritized consumer electronics and could not fill orders.

The car sector is the most high-profile victim to date, with giants including Ford and Volkswagen forced to cut production, but the shortage appears to be spreading to a wide range of electronic items.

“A perfect storm of coronavirus chaos, trade war storage and a paradigm shift in work from home devices are causing the chip squeeze,”

“Everything with a chip is affected – cars, smartphones, game consoles, tablets and laptops. Electronic gadgets and cars will be shorter or more expensive throughout 2021.”

Sales of certain iPhone models have reportedly been limited because certain components were not available, while some have pointed to a lack of chips for problems getting hold of Sony’s new PlayStation 5 and Microsoft’s latest Xbox.

A growing number of large chip manufacturers have expressed concern over the brewing crisis, including the US company Qualcomm, the world’s largest mobile chipmaker, and rival AMD, both of which supply large consumer electronics companies.

The supply chain for microchips is complex, and the American giants design semiconductors, but do not make them for the most part. Production is mostly outsourced to Asian companies such as Taiwan Semiconductor Manufacturing Company (TSMC) and South Korea’s Samsung. However, Samsung supplies are now threatened after being forced to shut down production at its Texas plant due to a power outage caused by a severe winter storm.

The shortage is expected to decrease later this year as the vaccines are rolled out.

Manufacturers have faced challenges in meeting strong demand for consumer electronics and then having to turn operations into car chips – changing production processes can take several months.

Taiwan, home to some of the world’s largest and most advanced foundries, and its manufacturers have come under increasing pressure from automakers and governments due to the shortage.

The island promised last month to increase production of car chips while TSMC said the car industry was a “top priority” – but warned that the factories already had full capacity.

The development of 5G technology has increased the pressure due to the need for countless chips to build a new generation of phones, wireless infrastructure and other equipment, said GlobalFoundries, a US headquarters with manufacturers in Singapore.

Washington has increased pressure on Huawei, which they accuse of stealing US trade secrets, and last year revealed sanctions banning the smartphone maker from using semiconductor designs developed with US technology.

As the technology giant began storing semiconductors before sanctions, other companies followed their lead, contributing to the global shortage.

“Hoarding has caused more hoarding,” said Mawston of Strategy Analytics.

“As Huawei has stored phone chips, other rival brands have (to a lesser extent) sought to collect their own shares to protect future supply.”

Chip shortages could delay production of nearly one million cars in the first quarter of this year, according to market research firm IHS Markit, although analysts say it is too early to assess the impact on other industries.

The shortage is expected to decrease later this year as vaccines are rolled out – so that factories can work at full capacity without workers taking social distances – and new facilities begin to operate.

But there may be supply problems in the future as the demand for chips grows, and analysts say the recent crisis is a wake-up call for the authorities to strengthen domestic industries and reduce dependence on a few players.

“Semiconductors are at the heart of the global economy,” GlobalFoundries said in a statement.

The company said it called on “governments to invest in semiconductor production and to do their part to help resolve the clear imbalance in semiconductor supply and demand.” Techbeezer