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Global chip shortages point to a ‘serious imbalance’

The global chip shortage appears to be getting worse, before there are any signs of it getting better, as Samsung has now warned that it's causing disruption in sectors other than automotive, and has warned that it might have to postpone the launch of the next Galaxy Note smartphone.

The company has been talking to its investors about ‘serious imbalances’ in the supply chain and this announcement has heightened fears that these market shortages could slow the global economic recovery.

While governments around the world are working to increase production Samsung's co-chief executive and mobile chief, Koh Dong-jin, speaking at a shareholder meeting, warned that, "It is hard to say the shortage issue has been solved 100%."

These shortages are being driven not only by the pandemic, which caused production schedules to be altered and deliveries cancelled, but recently by the severe weather seen in Texas which has impacted production - the shutdown of Samsung’s own Texas facility could reduce global smartphone production by 5% in the second quarter of this year.

The car industry has tended to dominate the headlines and has suffered severe shortages as car manufacturers initially cut their chip orders significantly, only to be wrong footed by a strong recovery in the Far East. In response, chip manufacturers shifted production to consumer goods as demand soared – driven by consumers buying new devices as they found themselves in lockdown.

All of which has tended to obscure the growing problems that are now facing other sectors, whether that’s a scarcity of graphics cards. the postponement of new model releases or shortages of popular products, such as gaming consoles.

While consumers might not be too troubled it's likely that we will see more delays when it comes to new product releases, such as Samsung's suggestion that the new Galaxy Note smartphone may now not appear until next year.

While semiconductor manufacturers are investing in new production, shortages can be expected to continue for some months.

These shortages have simply and clearly demonstrated the importance of semiconductors to so many sectors of the economy, and in turn have highlighted real weaknesses in the supply chain which is dominated by so few countries.

Author
Neil Tyler

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