Disruptions brought on by the scarcity of chips ought to quickly subside

The worst could soon be over, according to Goldman Sachs, when it comes to disruptions due to the global chip shortage.

Andrew Tilton, the bank’s chief economist for Asia, said the situation could improve in the second half of 2021.

He said there had been “noticeable tightening” of supply chains and delays in North Asian economies such as Japan, Taiwan and South Korea, which are involved in the semiconductor supply chain.

“This will have an impact on downstream sectors. Auto production is one of them,” he told CNBC’s Street Signs Asia on Monday.

“Our analysts believe that we are probably in the worst possible phase right now. That said, we are currently seeing the biggest disruptions in downstream industries such as the automotive industry, which will gradually subside over the course of the second half of the year, ”said Tilton.

Concerns in Taiwan

Still, Goldman’s Tilton said the situation is worth monitoring, especially if other supply chain disruptions arise.

“In Taiwan, there has been major concern that droughts or the resurgence of a new Covid outbreak could result in significant production downtime there. We haven’t seen that before, ”he said.

There have been a few isolated disruptions, but so far not enough to cause a major disruption to the semi-supply chain.

Andrew Tilton

Goldman Sachs Chief Economist Asia

Chip manufacturing plants use massive amounts of water every day, and Taiwan, home of the world’s largest contract chip maker, is facing its worst water shortage in 56 years. On Sunday, the island lifted some water restrictions after a recent heavy rainfall, Reuters reported.

Taiwan is also grappling with a Covid outbreak that emerged in May after the virus was successfully kept in check for most of the pandemic.

“There have been a few isolated disruptions, but not enough so far to cause a major disruption in the semi-supply chain,” said Tilton.

It remains something that will need to be watched closely over the coming weeks and months, he added.

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