Manufacturers warn over shortage of microchips

An alarming combination of difficulties which has come to a head  is causing a serious shortage of microchips for global electronics manufacturers and driving up prices.

According to reports, the problem has several causes, including bulk-buying by US sanctions-hit Chinese tech giant Huawei Technologies, a fire at a Japanese factory, coronavirus-related lockdowns in Southeast Asia, and a strike in France.

The fire at the Nobeoka City factory of semiconductor producer Asahi Kasei Microsystems (AKM) broke out at its semiconductor manufacturing plant on 20 October, and took three days to put out.

While no one was hurt, reportedly 400 employees were evacuated when it began. Parts of the building structure, including sections of walls and the roof, collapsed on 22 October after another fire broke out on the factory’s fifth floor.

Meanwhile, employees at all French sites of manufacturer STMicroelectronics went on strike last month over a pay dispute.

The microchip shortage is causing manufacturing delays as consumer demand for all manner of goods, including new generation smartphones and laptops, resurfaces in the run-up to Christmas.

A Japanese electronics component supplier said it was seeing shortages of Wi-Fi and Bluetooth chips and was expecting delays of more than 10 weeks.

It’s not only electronic goods manufacturers that appear to be concerned. The automotive industry in China flagged the issue earlier this month. According to reports, the sector is anticipating production at some Chinese carmakers to be affected in the first quarter of next year.

Consumer demand in China, especially for cars, has snapped back unexpectedly quickly from the coronavirus crisis, and orders for products such as laptops and mobile phones in regions still struggling with pandemic restrictions, such as Europe and the United States, have also picked up.

Dutch automotive chip supplier NXP Semiconductors has told customers it must raise prices on all products because of a “significant increase” in materials costs and a “severe shortage” of chips.

“Business came back much faster than we expected,” NXP CEO Kurt Sievers told German business daily Handelsblatt. “Many customers ordered too late. As a result, we are not able to keep up in some areas.”

Other short-term triggers for the chip shortage are understood to include stockpiling by telecoms giant Huawei ahead of mid-September when its suppliers had to comply with US sanctions, according to analysts.