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S&P Global Ratings believes the effects are broadening, disrupting the supply, operations, and prices of the smartphone and PC makers, and also the semiconductor firms that rely heavily on contract suppliers. S&P Global Ratings believes chip shortfalls will be the major variable affecting the revenues and profits of key global entities that S&P Global Ratings covers, for at least the next 12 months.
- Exploding demand and factory outages are creating acute chip shortages.
- Chip shortages have so far been mainly about power management integrated circuits (ICs) and driver ICs. Firms outsource production of the chips to older fabs to control costs. And as these older fabs already operate at a high utilization, they have less flexibility to meet sudden surges in demand. These chips are used in everything from smartphones to automobiles.
- Chip demand has exploded. This is driven by working-from-home arrangements, rising interest in chip-intensive electric vehicles, the rollout of 5G cellular services, automation trends, and the like.
- The effect of supply shortfalls is spreading beyond carmakers to any firm that relies heavily on semiconductors, such as smartphone and PC makers.
- There are winners and losers from this shortage, which S&P Global Ratings expects to drive the profit and revenues of large tech firms over the next year.
- S&P Global Ratings expects chip vendors to be able to largely pass on these higher costs to customers.
Ford Motor Co. has extended production halts at four U.S. plants and one in Canada for an additional two weeks, The Wall Street Journal reported, due to ongoing semiconductor shortages. The outages will reportedly impact the production of the F-150 truck that the company had previously kept going with reduced content.
Global semiconductor supplies continue to grow rapidly, as discussed in Panjiva's research of April 21, but a reduction in orders during 2020 has led manufacturers to prioritize other customers. A call to arms by the Biden administration is unlikely to yield an increase in availability within the time frame of a few months.
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U.S. automakers expect the second quarter of 2021 to be the trough of year for production as they continue to adjust output amid a global shortage of semiconductor chips.Read the Full Article
U.S. Steelmakers Downplay Auto Demand Pinch from Chip Shortages
U.S. steelmakers were able to mostly brush off automotive-related demand reductions as semiconductor shortages plague automotive OEMs.Read the Full Article
Chip Shortage Taking a Toll on Auto Shipments; Sales May Follow
U.S. automotive sales staged a recovery in March, with exports having jumped 33.2% sequentially and by 59.7% year over year, Panjiva's analysis of official figures shows.Read the Full Article
50-Cent Semiconductor Problem Yet to Drag on Acer's Deliveries
Laptop computer manufacturer Acer Inc. is feeling "growing pressure because of component shortages," according to CEO Jason Chen, Nikkei Asia reported.Read the Full Article
Aluminum demand should take only a limited hit in the automotive sector over the next quarter, even as vehicle manufacturers experience production disruptions caused by a global semiconductor shortage, Novelis CEO Steven Fisher said May 12.
"While we do expect to see some impact to our automotive shipments in [the next quarter], we believe it would be relatively limited as OEMs are prioritizing their production towards larger and more high-end vehicles like SUVs and EVs that favor aluminum," Fisher said during an earnings call with analysts.
Fisher said Novelis was also in a position to divert its capacity to other customer bases, regions or end markets to mitigate any larger impact it may experience from the automotive sector beyond the next quarter. Beverage cans continue to be a strong sector where the company can redirect production, he added.
How the Chip Shortage Will Shake Up China's New Energy Vehicle Market
The global chip shortage that has disrupted automakers' operations in China since late 2020 will get worse before it gets better. Fast auto demand recovery since the second half of 2020 and increasing demand from consumer electronics largely explain the tight chip supply globally.Read the Full Report
Global Semiconductor Shortages Could Chip Away at the Auto Sector's Recovery In 2021
The ongoing semiconductor shortage adds some downside risks to S&P Global Ratings’ global auto sales recovery assumptions for 2021. Semiconductor companies will have low inventories over the next few quarters due to broad chip shortages, but their revenues and profitability will be relatively unaffected.Read the Full Report
Geopolitical tensions with China persist, despite a new U.S. administration.
Near-term demand outlook for the global semiconductor market appears strong; federal policy and financial support would further support growth for U.S. semiconductor firms and equipment makers.
U.S. government's advocacy for less reliance on foreign chip making and incentives for domestic manufacturing should increase capital spending among semiconductor manufacturers; however, closing the manufacturing process technology gap with Taiwan Semiconductor Manufacturing Co. Ltd. will take time.
S&P Global Ratings expects the current semiconductor market upcycle to extend beyond 2021, raising upside potential for issuer ratings. Still, despite the broadening of end markets, the semiconductor industry will continue to be subject to short-term supply-demand imbalances and in the longer term, China's ambition for tech supremacy.
Tech Coalition Pushes Congress to Fund U.S. Semiconductor Production
The Semiconductors in America Coalition pressed Congress May 11 to include significant funding for US semiconductor manufacturing in the upcoming budget legislation to avoid future shortages of the critical computer chips.Read the Full Article
Everyone Loves Localization of Semiconductors; Applied Materials, Intel Act
A summit of CEOs from the semiconductor, automotive and other industries, held at the behest of the White House, focused on the need for transparency of supply chains in the short term and investment in U.S. manufacturing in the long term.Read the Full Article
U.S. Tech Firms Call on Biden to Invest Billions in Domestic Chip Manufacturing
Biden administration officials are meeting April 12 with nearly two dozen business executives to discuss the need for billions of dollars in investment to support domestic chip manufacturing, which is falling behind similar efforts in Asia.Read the Full Article
As chip shortages and geopolitical uncertainties plague the tech sector, Apple Inc. is making moves to play by its own rules.
- A recent report from S&P Global Ratings predicts the shortage of semiconductors will continue for at least the next 12 months.
- U.S. President Joe Biden has already taken steps to address the global chip shortage, signing an executive order in February to conduct 100-day reviews of potential risks within domestic semiconductor manufacturing and high-capacity battery production, among other industries.
- Biden has also urged Congress to invest $50 billion in semiconductor manufacturing and research as part of his $2 trillion infrastructure plan.
- Apple first announced its intention to begin the two-year process of replacing Intel's x86 chips in its Mac laptops and desktop computers with its own chip to provide users with greater performance while conserving energy.
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