Asia pacific financial news

Chip scarcity to final till not less than mid-2022, warns producer

The worldwide chip scarcity disrupting the automotive business and threatening the provision of shopper expertise merchandise will final for not less than one other 12 months, one of many world’s largest electronics contract producers has warned.

The forecast from Flex, the world’s third-biggest such producer, is among the gloomiest but for a disaster that’s forcing automotive and shopper electronics teams to re-examine their international provide chains.

A speedy rebound in car gross sales mixed with a lockdown-driven increase in video games consoles, laptops and televisions has left the world’s chipmakers overwhelmed by the sharp improve in demand.

Singapore-based Flex has greater than 100 websites in 30 nations and manufactures units and electronics for firms together with Ford, British family home equipment designer Dyson, UK on-line grocer Ocado and US laptop and printer maker HP. Its place within the provide chain makes it a big purchaser of chips.

Lynn Torrel, Flex’s chief procurement and provide chain officer, mentioned that the producers it depends on for semiconductors have pushed again their forecasts for when the scarcity will finish.

“With such robust demand, the expectation is mid to late-2022 relying on the commodity. Some predict [shortages to continue] into 2023,” she mentioned.

The forecast from Flex, which sits on the coronary heart of the provision chains for the automotive, medical units and shopper electronics industries, follows a bruising six months throughout which shortages have pressured automotive firms to reduce manufacturing and furlough employees.

The problem has led many firms to undertake a extra assertive method to sourcing, comparable to by paying for chips upfront. Tesla, the US electric-car maker, has explored shopping for a chip plant outright.

Electronics producers in Asia have additionally lately warned that the chip scarcity was starting to unfold to TVs, smartphones and residential home equipment, with the scenario made worse by means of stockpiling by Chinese language teams hit by sanctions.

Pandemic-related issues with provide chains have been compounded by the blocking of the Suez Canal in March, the intense chilly climate in Texas, and a latest hearth at a big chip manufacturing unit in Japan.

Revathi Advaithi, chief govt of Flex, mentioned that the disruption wrought by the pandemic is prompting its multinational clients to take a much more critical take a look at restructuring their provide chains than the commerce conflict between the US and China ever did. This might embody making them extra regional, she added.

“Most firms gained’t decide to regionalise simply on tariffs,” she mentioned. “They comprehend it could possibly be a short-term factor however issues just like the pandemic and escalation of transport prices that affect the overall value of possession drives regionalisation.”

New York-listed Flex, which recorded $24.2bn in revenues final 12 months and has manufacturing services evenly break up between Europe, Asia and the Americas, has been pressured to interrupt manufacturing for a variety of electronics merchandise.

Chipmakers are investing in new manufacturing capability however it could possibly take as much as two years to arrange the complicated services.

Torrel mentioned the image might enhance if Covid-19 vaccinations trigger shopper spending to shift in direction of companies and folks spend much less cash on shopper electronics because the world recovers from the pandemic.

Nonetheless, she cautioned that seemingly small issues — comparable to a latest two-week lockdown in Malaysia, the place many semiconductor suppliers are primarily based — can have an outsized impact on provide chains already underneath stress.

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