Friday, September 17, 2021

Virus surge deepens global supply chain crisis

The new outbreak of COVID-19 in Asia is exacerbating global supply chain problems that began last year at the start of the pandemic and shutdown measures. The latest wave of infections in Malaysia and other Southeast Asian countries has closed plants and ports, causing severe disruptions in semiconductor and raw material supplies.

Economists and supply chain experts predict such shortfalls will continue into 2022, adding to inflationary pressures.

Labor shortages and supply chain bottlenecks due to the delta variant are not only crippling businesses in Asia, but also affecting many countries, including the United States.

“Thailand, Vietnam, Indonesia, Malaysia and the Philippines together account for about 6 per cent of global exports, but their dominance in electronics makes them a major influence on countries such as the US and China,” wrote Northern Trust economist Vaibhav Tandon. a recent report.

“Malaysia has become a hub for chip testing and packing, with electronics and electrical products accounting for 39 per cent of the country’s total exports,” he said.

Recent chip shortages have forced General Motors to halt production for most of its North American assemblies after Labor Day. Ford, Toyota and Volkswagen have also announced production cuts in response to global semiconductor shortages.

However, the auto industry is not the only sector feeling the crisis.

“Everything has been affected, from washers and dryers to PlayStations and Xboxes,” said Stephen Eisel, vice president of the Information Technology and Innovation Foundation.

Southeast Asian countries “play an important role in various aspects of the semiconductor production process,” he told The Epoch Times.

The chip manufacturing process is global, with different countries specializing in different stages across the value chain.

Countries in Southeast Asia, particularly Malaysia, Vietnam and the Philippines, have specialized in the final stages of chip manufacturing – assembly, packaging and testing – which are less skill- and capital-intensive than the front-end fabrication phase. Is.

While assembly, packaging and testing activity is mainly concentrated in Taiwan and China, new facilities being built recently in Southeast Asia have made the region a new hub for chip manufacturing.

Ezel said the devastation brought by the Delta variant in Asia is the latest, but not the biggest, event for the semiconductor industry.

He said the global chip shortage was already worsened by a series of events this year, including a fire at a chip plant in Japan, severe drought in Taiwan and a winter storm in Texas.

“Inadequate supply of chips and solid demand could drive automobile and other producer prices higher in the near-term,” Bank of the West’s chief economist Scott Anderson wrote in a recent report.

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The sharp rise in car prices has contributed significantly to the high inflation this year. The consumer price index for new vehicles rose 6.4 per cent year-on-year in July, while the price index for used cars and trucks rose 41.6 per cent in the same period.

‘Domino effect’

Los Angeles and Long Beach, the two busiest US ports, have also experienced exceptional congestion, partly due to plant and port closures in Asia.

China’s Meishan Terminal at Ningbo-Zhoushan Port, the world’s third-busiest container port, was closed for two weeks in August, following a month-long shutdown of China’s Yantian port in late May.

“Whenever there are delays and impacts on ports of origin, you’re definitely going to see that domino effect,” Mario Cordero, executive director of the Port of Long Beach, said during a press briefing. Era Times.

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Southern California, he said, is “the epicenter for imports from Asia to the United States” and the backlog in Asia is one reason why California’s two ports have record numbers of ships at anchor outside the port.

He said that two weeks ago, these ports saw heights ranging from 44 to 46 ships at anchor, compared to just nine ships in June.

While many predict that the problem of chip shortages will be resolved in 2022, some industry experts are warning that it could take years for global chip supplies to return to normal levels.

The transition to electric vehicles has also compounded the problem.

Ford Europe president Gunnar Herrmann has predicted the shortage could continue until 2024. In an interview with CNBC, Herrmann said that about 300 chips are needed to produce a Ford Focus, while an electric vehicle might require as many as 3,000 chips.

“It’s not just semiconductors,” he said, adding that other items, including lithium, plastics and steel, are also in short supply. “You find constraints or constraints everywhere.”

To address the global chip shortage, several chip makers, including Intel, Samsung and TSMC, have announced ambitious expansion plans in the United States. But according to industry experts, it takes many years to build new production capacity.

Amell Akan is a White House economic policy reporter in Washington, DC, having previously worked in the financial sector as an investment banker at JPMorgan and an advisor at PwC. He graduated from Georgetown University with a master’s degree in business administration.

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This News Originally From – The Epoch Times

Virus surge deepens global supply chain crisis
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