Global chip shortage continues amid inflation, rising rates and war: IDC

The global shortage of chips will continue, and consumers will have to pay for it, according to an analyst at International Data Corporation.

Sasirin Pamai | source | Getty Images

global chip shortage is not over yet, and the war in Ukraine continues to create problems with the supply of necessary parts, one CNBC analyst said Tuesday.

“Semiconductor supply will not increase immediately. raw material, gasesthat were needed to manufacture these semiconductors, Vinay Gupta, director of research for the Asia-Pacific region of the International Data Corporation, told CNBC.Squawk Box Asia. “

Referring to supply chain problems due to Russian war in UkraineGupta said the two countries are capturing most of the market share, with Russia and Ukraine being the biggest exporters of krypton, a gas used in chip production.

Neon is also critical to the chip-making process and is used for lasers known as lithography, where machines carve patterns into tiny pieces of silicon made like Samsung, Intel as well as TSMS.

More than half of the neon in the world manufactured by a handful of companies in Ukraine, according to Peter Hanbury, a semiconductor analyst at research firm Bain & Co.

Semiconductors are used in everything from mobile phones and computers to cars and home appliances.

Supply chain disruptions and rising costs will also mean that “the average selling price of devices will rise, and then infrastructure providers will transfer it to customers,” Gupta added.

‘Signs of a recession’ in consumer spending

Rising inflation and expecting more monetary tightening are already causing a “consumer-driven slowdown,” Gupta said.

“IT spending, especially consumer spending on IT, is showing signs of a recession.”

While corporate IT spending, which includes software services, cloud and IT services, continues to linger, inflation has pushed the business up. to “protect your IT budgets right now”.

He added that, combined with rising interest rates around the world, this slowdown will “bite”.

“But there is hope that this will be a superficial slowdown because the government and central banks are trying to balance rising inflation and interest rates,” Gupta added.

Last week, statements from two officials showed that the Federal Reserve is on track to another sharp increase in interest rates in July and possibly September, even if it slows down the economy.

In June the Fed approved 75 basis pointsor 0.75 percentage points, to its base borrowing rate, the biggest such move since 1994.

Slow Hiring, Less Cost in Asia

On Tuesday, bloomberg announced Apple’s plans to slow down hiring and growth spending next year to deal with a possible downturn. A “similar trend” will be seen in Asia’s tech sector, Gupta said.

“I believe this will be a trend that we will start to see [in] late 2022 or early 2023 if the situation does not improve.”

“When it comes to IT services in Asia, most of them are under pressure on margins due to rising payroll costs and skills gaps… in the market.”

In India, for example, the tech giants’ margins are “slightly lower despite the increase in hiring in the first quarter,” Gupta added. But this may not last long.

“Due to the pandemic, many businesses have switched to new digital technologies, allowing their employees to work from home, so [there were] many new digital transformation projects,” he said.

“But we’re going to start to see some margin pressure because obviously enterprise revenues will suffer if we see the whole scenario play out the way you see it now.”