A global shortage of semiconductors is affecting everything from smartphone sales to car manufacturing. Disruption caused by Covid-19 has collided with an unprecedented surge in demand for electronics, says Wallace Witkowski for MarketWatch. Research firm IDC reports that PC sale volumes are expected to advance by 18% this year. Global shipments could hit 357.4 million computers, beating the record set in 2011.
Car makers have been particularly badly hit by the shortages; many cancelled chip orders when the pandemic hit, only to be surprised by the strength of demand for new vehicles. The shortage means it’s a good time to be a chip maker. The PHLX Semiconductor Index has gained 92% in a year. Building a new manufacturing plant can take two years and costs several billion dollars, so analysts say the shortage is likely to persist at least into next year.
But don’t buy into the boom, says Daniel Tenreiro for National Review Capital Matters. The chip industry has always been highly cyclical. Periodic shortages provoke new investment, which leads to excess supply and plunging prices. This time governments are also getting in on the act: the US, EU and China are all creating subsidies to ensure that they can have a sovereign supply of chips. In a few years we could have a glut of silicon.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
Where are ISA savers and investors putting their money?With less than three months until the end of the tax year, where are ISA savers and investors putting their money? We look at the latest ISA trends.
-
More than £53 billion held in fixed-rate cash ISAs will mature by April - where should savers move their money?If your fixed-rate cash ISA is maturing soon, we look at the options available to you
-
Why Wise could be worth a lot more than its share price impliesForeign-exchange transfer service Wise has the potential to become the Amazon of its sector – here's why you should consider buying this stock now
-
Can The Gym Group pump up your portfolio?Gym Group was one of the best UK small-cap stocks in 2024 and will beef up your profits this New Year
-
MoneyWeek's five predictions for investors in 2025MoneyWeek's City columnist gazes into his crystal ball and sees five unexpected events in store for investors in 2025
-
How buy-and-build stocks deliver strong returnsBunzl, DCC and Diploma became successful through buy-and-build – rolling up dozens of unglamorous businesses. How does it work and what makes it successful?
-
Singapore Technologies Engineering shows strong growthSingapore Technologies Engineering offers diversification, improving profitability and income
-
Royal Mail takeover by Czech billionaire approved for £3.6bnRoyal Mail is now owned by Czech billionaire Daniel Kretinsky, following a £3.6 billion takeover
-
Will AI be the future of advertising?It remains to be seen, but the idea that AI providers can make money from advertising does not bode well
-
AstraZeneca goes cheap – should you buy?The decline in AstraZeneca’s share price is overdone given the outlook, and the stock is cheap
