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Why is there a computer chip scarcity throughout the world? 


The semiconductor chip scarcity, which has hampered numerous industries, particularly the auto industry, is unlikely to be resolved very soon.

The spread of the delta form, along with poor vaccination rates in several ASEAN nations and China's zero-tolerance Covid approach, has caused governments to impose restrictions and order industrial or port closures, according to a recent research by Nomura.

Apart from that, in August, a lack of raw materials and container availability increased lead times the period between ordering a chip and receiving it. This is especially true in nations like Vietnam, South Korea, and China, which are part of industrial supply networks.




This comes at a time when most chip supplies throughout the world are already running low. According to Nomura, input shortages and low stocks would likely result in production cutbacks and delayed shipments in the September 2021 quarter.

"In reality, the manufacturing PMI's production and export order components both fell in August. Asia is home to several of the world's manufacturing behemoths.




In a recent study, Sonal Varma, Nomura's head economist for India and Asia ex-Japan, said, "If these supply restrictions do not start to ease over the next month or two, greater downstream product prices might be in store for the Western consumer markets."

The manufacturing PMI component of the suppliers' delivery time index fell in eight of nine Asian nations in August, to an average of 41.3 from 42 in July, both below the 50-mark barrier, according to statistics.

For example, Vietnam's IHS Markit PMI dropped to 40.2 in August from 45.1 in July, marking the country's third month of contraction and lowest rating since April 2020.




Thailand's PMI, on the other hand, fell to 48.3 from 48.7, marking the country's sixth decline in the last eight months. The Philippines' PMI dropped from 50.4 to 46.4, its lowest level since May 2020.

Malaysia and Indonesia saw some relief in August, with PMI readings rising to 43.4 from 40.1 in July and 43.7 from 40.1, respectively, albeit both remain below the 50-point threshold that divides contraction from expansion, according to IHS Markit statistics.

"In August, manufacturing PMIs in Indonesia, Vietnam, Thailand, the Philippines, and Malaysia were all deep in negative territory, indicating the disruption caused by lockdowns that forced firms to halt or reduce output," Varma added.






According to a recent estimate, the worldwide semiconductor business is worth $439 billion dollars. According to a recent research by The Ken, Taiwan is the epicentre of the semiconductor industry, with 63 percent of foundries located there, followed by South Korea (18%) and China (6%), with the remaining 13% located in various nations across the world.

According to a letter from Emkay Global dated August 30, the lead time for automotive chips has risen from 8-12 weeks to 36-40 weeks. This, according to the study, is due to an increase in Covid-19 instances as well as supply chain limitations in Asian nations. Because of the chip scarcity, Maruti Suzuki estimates a 60% decrease in overall vehicle output in September across its Haryana and Gujarat facilities.





"Chip shortages are likely to remain in Q2 and Q3 of FY22, with supply improving in a phased fashion. Emkay Global's Raghunandhan N L, Mumuksh Mandlesha, and Bhargava Perni stated, "Lead times are anticipated to reduce to 18-20 weeks by Q4 of FY22 and may come down to typical 8-12 weeks by FY23-end."







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