Disruptions Arising from Global Chip Shortage to End This Year, Says Goldman Sachs

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Regarding the disruptions caused by the recent chip shortage, Andrew Tilton, chief economist at Goldman Sachs (Asia) believes that the worst is about to end and the shortage will be in the past soon. The production of household electronics including washing machines, microwaves and other electronics has been badly hit following the chip shortage. Tilton noted that the company analysts believe that they’re currently in the worst period, where the biggest disruptions are being experienced in many industries. The economist however believes that the shortage will ease off in the second half of the year.

Tilton said that disruptions of shipping and supply chains, which cause delays have of late been noticeable in North Asian players including South Korea, Japan, and Taiwan. These countries are key players in the semiconductor chain of supply. The Goldman Sachs economist added that the delays and disruptions definitely have an impact on some industries like the auto industry which heavily relies on the rare chip.

Chip Shortage Results

In an interview with CNBC, Dan Hearsch, one of the directors at Alixpartners, believes that the auto industry is set to lose $110 billion, thanks to the shortage. The director sees the effects coming to play in the second quarter before stability and norm is achieved later in the year.

With another Covid-19 resurgence, there is a high likelihood for another disruption, affecting production and supply chain of this rare commodity (chip). Tilton believes that the situation is worth evaluating and monitoring. He however added that they’ve had noticeable disruptions but none of them is capable of affecting the semiconductor supply chain.

Chip Manufacturing

According to Andrew Tilton, the manufacture of the chip requires a lot of water each day. Unfortunately, the world’s largest chip producer is based in Taiwan, a country experiencing its worst water shortage ever for the last 56 years. However, Taiwan eased some water restrictions after recent heavy downpours on Sunday. Besides the water issue, Taiwan is one of the countries that was hard hit by a Covid-19 resurgence in May.

What the Future Holds

With a ready and available market for automotive and household electronics, the demand for the chips is obviously at its peak, and its production shouldn’t be in any way interrupted. Taiwan managed to keep the Covid-19 resurgence at bay hence, creating a healthy environment for industrial workers- a plus.

Also, the recent downpours in Taiwan have greatly alleviated the water situation. True to Goldman Sachs economist’s prediction, the future is undoubtedly bright for the chip industry, and the norm is about to be achieved in the near future.

Patrick is an accounting & economics graduate, a Cryptocurrency enthusiast, and a Blockchain technology fanatic. When not crafting informative pieces on any of the above subjects, he will be researching on how the Blockchain technology can transform the world, particularly the financial space.