COMPONENT SHORTAGE. The semiconductor shortage that has plagued the industry for months is growing. Major players like Apple and Nintendo must review their production and sales downwards.
[Mis à jour mercredi 3 novembre à 11 h 00] Are we going to run out of smartphones, game consoles and computers at Christmas? We could well fear it as the situation is so tense on the high-tech product market due to the shortage of electronic components which has hit many industrial sectors for a year. Thus, according to the Japanese daily Nikkei, Nintendo has just lowered its production forecasts for Switch, its ultra popular console, by 20%, including its latest version equipped with an Oled screen. Instead of some 30 million units planned between March 2021 and March 2022, only 24 million could leave factories. A nasty blow at the end of the year, a period always conducive to fun gifts. But the gaming console specialist isn’t the only one suffering right now. Even Apple, which had yet secured its back by stocking up on components, has to change its mind because of the shortage of semiconductors. Always according to the Nikkei, the apple brand is forced to reduce its iPad production to favor the iPhone 13, its latest flagship smartphone, which is starting to be scarce, even in its mini version, the least requested … Only Tesla seems to release its for the moment, thanks to still solid reserves and a policy of anticipation, according to The Expansion. but for how long?
A stronger-than-expected economic recovery
Automobile manufacturers unable to produce and deliver the cars ordered on time, manufacturers of consumer electronics (game consoles, smartphones, TV, etc.) who can no longer find certain basic components necessary for the manufacture of their vehicles. devices… Here are some of the unfortunate examples linked to the current shortage of electronic components which is now hitting the global economy hard. Because in economics, precisely, we speak of scarcity when the demand for a commodity exceeds the supply. And this shortage is dragging on since, according to the CEO of Intel, Pat gelsinger, the balance between supply and demand will not be back before 2023. A crisis in production and consequently in consumption which invites long-term reflection. What happened ?
Already strongly marked by the Covid-19 pandemic which had led to a significant wave of factory closures, the countries of Southeast Asia – region of the world where is located, according to a study carried out in April 2021 by the Boston Consulting Group nearly 75% of the world production of semiconductors – the players in this sector were not able or not able to anticipate the very strong current recovery of the economy. It must be said that the pandemic had already been accompanied by its share of unpredictable effects, supporting demand for semiconductors. Increase in teleworking, and therefore in demand for computers, tablets, smartphones, but also in leisure electronics (game consoles, etc.), launch of 5G, development of needs related to cloud computing (online services starting with storage), artificial intelligence, and connected objects, the sector was already overheating and it is now exploding. While the situation should gradually improve in the coming months, “we are currently at the bottom of the wave”, Pat Gelsinger, head of US semiconductor giant Intel, recently said.
A structural crisis that calls for change
The reasons for the current crisis are also deeper and in some ways go far beyond the pandemic episode the world is going through today. The production of semiconductors is in fact particularly greedy in rare and noble metals, raw materials which could be exhausted within a few decades, as Guillaume Pitron, author of The Rare Metal War (The Links That Liberate, 2018). It is also a sector that consumes a lot of fresh water. In Taiwan, for example, where 63% of the world’s semiconductor production is found, TSMC, one of the leading specialists in the sector – which supplies chips in 5nm technology to Apple, for example – needs , 156,000 tonnes of water per day to clean the multiple layers of metals composing the chips.
Problem: What happens when, as was the case in spring 2021, the island of Taiwan is hit by drought? From a long-term perspective, TSMC has just decided to build a water treatment plant and to reduce its consumption by 30% by 2030. From both a political and geopolitical point of view, regions of the world such as the United States and Europe seem today to take full measure of the situation . The United States, for example, has just convinced TSMC to build an ultra-modern factory in Arizona. As for Europe, it has just drawn a “European Chips Act”. This European law, which should be accompanied by several tens of billions of euros of investment, aims to have 20% of semiconductors produced in Europe by 2030, against less than 10% today. The American Intel has understood the message by announcing in the wake of the imminent establishment of a mega-factory in Europe. But the Old Continent also seems determined to tackle part of the problem, even more strategic, since it concerns the resources of metals and rare earths necessary for the production of semiconductors. As noted The new factory, a structure launched by the European Commission in 2020, the European Raw Materials Alliance (Erma), has thus identified 14 extraction or recycling projects in Europe in order to meet 20% of European needs in the medium term. And several European countries including France, the second largest maritime domain in the world, are also eyeing on the seabed which could supply them with rare metals.
Prices that stagnate or increase
For the consumer, the undesirable effects of this production and supply crisis are expected to be numerous and have not finished being felt: delivery delays, postponed technological innovations, even regression in some cases, and, above all, increase prices… This is particularly true in the consumer electronics and computer sectors where the equipment-price ratio stagnates when it is not falling. To be convinced, it is enough to see the prices of laptops which rise, with similar or identical characteristics: certain models of PC were less expensive at the beginning of 2021 than now! And what about the graphics card market or, due to the rarity of the latest high-end Nvidia models, old references are sold on the second-hand market at prices higher than new! Ditto for the PS5, Sony’s latest generation game console, which is snapped up as soon as it is available in stores.
The current shortage of electronic components is at the heart of what is akin to a game of dominoes where the explosion in demand and the concomitant reduction in supply put several sectors of the economy (and not the least) in competition. from IT to the automotive industry. The French manufacturer Renault recently had to opt for the temporary closure of half of its factories in France, due to a lack of components. In addition, the group which anticipates a drop in sales of 500,000 vehicles over the year 2021 has also resorted, as noted The Express, To “a (small) technological leap backwards. It is by hand that the future owners of Clio, Captur and Arkana will now have to fold their mirrors (…) Renault has in fact decided to no longer offer, until ‘to new order, their electrical equivalents, greedy in semiconductors “. It must be said that our cars, whether thermal, electric, hybrid or autonomous, are more and more dependent on electronics (on-board computer, ABS, Airbag control, safety distances, the engine, the battery, The air conditioning…).
As we can see, the situation is not simple. And it is not going to get any better, because it affects both industrial tools and economic policies. It will probably take several months before a return to normal. In the meantime, it is better to hold on than to run because it is likely that many products in high demand are regularly out of stock. In the absence of good deals, it will probably be necessary to resolve to buy what is available …