Business Today Egypt (BT) July - August 2021

Spotlight
Figure 3: Worldwide annual car production
Source: Statista, Estimated worldwide automobile production
Figure 4: Top five global smartphone shipments
Source: IDC Quarterly Mobile Phone Tracker
As is depicted in figure 4, mobile phone shipments
for the top five companies have seen an
increase during the fourth quarter of 2020, except
for Huawei which is possibly due to the
US sanctions imposed on it to limit its activities
overseas.
US sanctions on China
Before COVID-19, the chip and semiconductor
industry encountered pressure due to
the trade war between the United States and
China, which primarily affected Huawei. To reduce
the impact of sanctions, Huawei started
storing chips and Taiwan’s TSMC was its exclusive
supplier, which placed pressure on the
market.
Insufficient supply
The chip market is controlled by a small
number of market players. The global shortage
of chips has drawn attention to Taiwan’s mammoth
role in manufacturing semiconductors,
as it captures a larger share of the market as
shown in the figure below:
As illustrated by figure 5, Taiwan has got the
lion’s share of the chips and semiconductors
market, particularly TSMC whose market share
reached 54 percent till early 2021.
In addition to all the previous reasons, a chip
plant owned to the Japanese Renesas Electronics
which supplies the market with about 30
percent of the microcontroller units used in
cars was exposed to a fire last March,
and it will will take about 100 days at
least to restore full capacity.
Dire consequences
The chip shortage crisis has many
negative repercussions on several industries,
some of which have already
begun to emerge and others are likely
to emerge in the coming period. Below, we detail
these implications.
Decline of production in automotive and electronics
sectors
According to IHS Market, the global chip
shortage crisis could affect the production of
about 1.3 million cars globally during the first
quarter of 2021. The crisis forced many global
automotive manufacturers to reduce production
and accordingly adjust schedules and action
plans.
In response to this crisis, a large number of
global automotive manufacturers including
Volkswagen, General Motors, Ford, Toyota,
Daimler, and BMW, among others, have announced
procedures to overcome the pandemic
reducing production, shutting down
factories, and temporarily laying off staff.
The automotive industry, however, wasn’t
the only affected sector. The crisis also hit
technology companies after seeing an improvement
last year. For example, Apple delayed the
release of iPhone 12 for two months due to
the chip shortage. Samsung also warned that
its operations might be affected by the chips
crisis, thus confirming the transfer of the crisis
to the technology sector.
In a related context, Gigaset, a manufacturer
of smart phones and smart home appliances,
indicated that about 80 percent of its production
has been affected by the lack of electronic
chips. Moreover, AVM stated that suppliers
canceled chips’ purchase orders shortly before
the scheduled time.
Rising prices
With shortage of supply in chip-dependent
industries due to the decrease in total production
and recovery of demand in the automotive
and smart devices sectors, prices of products in
these two sectors are expected to rise in the upcoming
period. Xiaomi’s CEO pointed out to
that stating, “chip shortage has increased costs
which may pass on to consumers.”
Figure 6 show that the average price of smartphones
is constantly increasing, with expecta-
42 July-August 2021
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