Factors that normally wouldn't make much different now have the potential to have a bigger effect on chip supplies, Goldman Sachs chief Asia economist Andrew Tilton said.
DreamstimeFor anyone attempting to buy a car, a videogame console, or even a home appliance, the effects of the global chip shortage are palpable. Products are hard or impossible to buy, and it isn’t clear when the situation will let up.
Goldman Sachs chief Asia economist Andrew Tilton appeared to offer good news for consumers in an interview with CNBC late on Monday. Tilton said that the bank’s analysts are predicting that the shortage is at its worst at the moment, which suggests that the problem will diminish over the second half of the year.
“Our analysts believe we’re probably in the worst period of that right now,” Tilton said on the network. ” …[T]hat will gradually ease over the back half of the year.”
Today’s shortage of chips was partly caused by Covid-19: A drop in demand, followed by a violent return in spending on consumer goods, left companies scrambling to secure enough chips. Tilton said on CNBC that because chip supplies are constrained at the moment, investors should be on the lookout for factors that don’t normally have an outsize impact on supplies.
This year’s cold weather in Texas is one such example, as was a fire at a chip maker in Japan. There are also concerns over a drought in Taiwan because it takes an enormous amount of water to manufacture semiconductors.
“There was a lot of concern in Taiwan that droughts or the resurgence of a new Covid outbreak there could result in a significant shortfall in production,” Tilton said on CNBC. “So far we haven’t seen that.”
Tilton also said on the program there have been several isolated disruptions so far, but nothing severe enough to cause a “major disruption to the semi supply chain.”
It’s likely different types of chips will recover from the shortage at different rates. The world’s most advanced semiconductors are manufactured by three companies: Intel (ticker: INTC), Taiwan Semiconductor Manufacturing (TSM), and Samsung Electronics. Intel’s chief executive Pat Gelsinger has told Barron’s he expects the shortage to last for roughly two years.
Other types of chips, such as those made for vehicles, are generally fabricated with older processor technology. Some companies are reluctant to make the multibillion-dollar investments needed to make new factories producing those older chips, so the industry will have to figure out ways to squeeze more yield from existing capacity.
The PHLX Semiconductor index, or Sox, retreated 0.5% in Tuesday trading, while the Nasdaq Composite was up 0.2%.
Write to Max A. Cherney at max.cherney@barrons.com
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The Chip Shortage Could Be Easing, Goldman Sachs Says - Barron's
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