Natixis on international chip scarcity, know-how struggle between the USA and ChinaChina
Global chip scarcity is causing problems for multiple industries and showing no signs of slowing, but don’t expect prices for all types of chips to skyrocket, says research firm Natixis’ Asia-Pacific chief economist.
Automakers are hardest hit by the scarcity, but the crisis affects everything from game consoles to televisions.
But not all industries or products can suffer in the same way. In fact, there could be an oversupply of certain chips, according to Natixis’ Alicia Garcia-Herrero.
“These chips, which I expect to have overcapacity, are the kind of low-priced chips,” she told CNBC on Thursday. “That’s because China is getting into this part of the supply chain very quickly with huge investments.”
In other words, Garcia-Herrero said on Squawk Box Asia, there will be segmentation of prices.
“The lower chips are very likely to have falling prices … But for the best – those that are really relevant to 5G and electric vehicles – we want. So this will have some inflationary consequences, ”she said.
The ongoing shortage was caused in part by corporate inventory levels as the pandemic swept across the world and delivery fears grew.
But geopolitics also play a role.
In the midst of the tech rivalry between the two giants, last year the U.S. placed restrictions on China’s largest chipmaker Semiconductor Manufacturing International Corporation, prevented it from obtaining advanced manufacturing equipment, and made it more difficult to sell its finished products to companies with American connections.
As a result, some companies decided to store critical chips from these restrictions.
Garcia-Herrero said these geopolitical risks will not go away. Both the US government and the tech sector have urged increasing the country’s semiconductor manufacturing capabilities to hedge against this risk. While some US companies are developing their own chips, the vast majority of chips worldwide are currently made in Taiwan, South Korea, and China.
“This is the problem that complicates inflation – that the most valuable part of the US supply chain is exposed to a lot of geopolitical risks … and that’s not going to change,” she said.