The global chip shortage is hurting businesses and could be a national security issue.
By: RENDC 8 February 2021
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- The semiconductor industry is facing serious supply issues as global demand spikes.
- The modern world relies on semiconductors for everything from working at home to military applications.
- These are 9 quotes from analysts, CEOs and politicians that help explain what the chip shortage means for stocks and national security.
- Visit the Business section of Insider for more stories.
Semiconductors are a critical part of the modern world. They're used in everything from iPhones to fighter jets, and without them, much of the technology that makes daily life possible in 2021 simply wouldn't be able to exist.
Every time you step into a car or send an email, you're using semiconductors. So, when the global supply of these precious chips begins to wane, it can be a big problem.
Take the auto industry as an example. These days, electronics account for roughly 40% of a vehicle's value, according to a comprehensive analysis from Deloitte. And in order for those electronics to function properly, automakers need semiconductors. Without them, production lines stall, and supply can't keep up with demand.
Over the past few months, it's become clear that there is a global shortage of semiconductors. Some blame the problem on poor planning, supply-chain complexities, and a tradition of keeping chip inventories low in key industries due to expense.
However, others argue the chip shortage is more a function of the world's growing demand due to 5G developments, the expansion of online gaming and video streaming, and the increasing complexity of modern automobiles.
Whatever the reason, one thing is clear, the world needs more chips. Without them, production in key industries will begin to fall, and that could mean serious consequences for the stock market or even national security.
To help better understand the semiconductor crisis, here are a few quotes from CEOs, politicians, and analysts discussing the topic.
Here are 9 quotes that help explain what the chip shortage means for stocks:
- "We're seeing such tight demand across the entire semiconductor supply chain right now, which we think is an important issue that the United States needs to work with partners around the world to address…We've seen GM shutting more production lines down this week. Having cars not manufactured is a bit of an annoyance, but if we can't get critical chips we need for fighter jets, military applications, and artificial intelligence applications that the economy is increasingly running on, it's a big problem. " - NZS Capital Cofounder Brad Slingerland on CNBC's "Squawk Alley"
- "Despite our mitigation efforts, the semiconductor shortage will impact GM production in 2021. We are currently assessing the overall impact, but our focus is to keep producing our most in-demand products. Semiconductor supply for the global auto industry remains very fluid." - General Motors in a statement to Reuters.
- "It's early days, we're doing a lot. Ford knows how to scramble. We're adjusting yield management, moving the chips that we do have to the most profitable vehicles, our electric vehicles. You know, protecting production of strategically important vehicles. We're working through it right now." - Jim Farley, Ford CEO on CNBC's "Squawk on the Street".
- "We write to express our concerns about the impact that the global shortage of automotive-grade semiconductor chips will have on auto manufacturing in the United States. This shortage threatens our post-pandemic economic recovery, the consequences of which stand to be especially acute in dominant auto manufacturing states like ours. We believe that the incoming administration can continue to play a helpful role in alleviating the worst impacts of the shortage on American workers, and we urge you to work with us to address the global semiconductor shortage."- Senators Todd Young (R-Ind.) and Rob Portman (R-Ohio), and a group of bipartisan Senators, in a letter to Director of the National Economic Council Brian Deese.
- "We expect semiconductor industry supply constraints on both wafers and substrates to only partially ease in second-half 2021, with some leading-edge (computing, 5G chips) tightness to extend into 2022." - BofA Securities semiconductor stocks analyst Vivek Arya in a note to clients.
- "We have seen, I think, probably shortage across the entire industry. There is a couple of factors driving that. One is the shape recovery, I think, across many of the sectors that were present now. We saw acceleration of digital transformation also consistent with this trend of the enterprise transformation of the home...So that's driving a situation that demand is outpacing supply." - Cristiano Amon President of Qualcomm in fiscal year Q1 2021 earnings call.
- "This is one that President Biden really has to get involved in because he can make a difference. We need all (companies) at work in order to be able to meet this incredible chip shortage." - Jim Cramer on CNBC's "Squawk on the Street"
- "While there's been some debate about whether shortages will be good or bad for the (semiconductor) group, our view is that such a supply/demand imbalance is unquestionably positive for the semi suppliers. Historically, when semis are in shortage, it has been favorable to pricing." - Raymond James semiconductor stocks analyst Chris Caso in a note to clients.
- "It is difficult for us to increase production of the PS5 amid the shortage of semiconductors and other components. We have not been able to fully meet the high level of demand from customers (but) we continue to do everything in our power to ship as many units as possible to customers who are waiting for a PS5." - Hiroki Totoki Sony's CFO in the company's FY Q3 2020 earnings call.
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