• Thursday, Mar 23, 2023
  • Last Update : 10:24 am

Global chip shortage is causing electronics prices to increase in Bangladesh

  • Published at 01:45 pm August 2nd, 2021
Semiconductor chips

Industry analysts suspect that the worldwide shortage might last until the second quarter of 2022

As manufacturing industries are making a comeback after being compelled to keep their factory units shut due to the global surge of coronavirus cases, many industries are yet to run in full swing as the world is currently in the middle of a major shortage of semiconductor chips. 

Industry analysts suspect that the worldwide shortage might last until the second quarter of 2022. The global chip crisis has disrupted the supply of electronics and electric vehicles (EV), and practically anything that plugs in. 

It is estimated that a total of 179 different industries are being affected by this shortage of supply. At present, the global market size for semiconductor chips is $425 billion.

As the entire world is feeling the burn, Bangladesh is not an exception. The shortage drove up smartphone prices ever since March. Even though the country is not big on semiconductor usages, there are manufacturers such as Walton and Minister who are suffering due to the ongoing crisis. This will cause a rise in the prices of electronic goods, which can end up having severe consequences for the manufacturers. 

Reasons for the shortage

The chip shortage is caused primarily due to the pandemic as there were logistical issues during lockdowns. Through the entire 2020 and the first half of 2021, the entire automobile industry was not able to operate their manufacturing units for which the sales have gone down and so did the demand for these semiconductor chips. 

Modern automobiles have become ever more dependent on chips and now as the factories are opening up- they are being forced to scale down their production. This shortage could ultimately impact around 2 million units of global personal vehicle production in 2021.

In the meantime, the major manufacturers of these semiconductor chips have moved on to supply in other industries that have skyrocketed sales during the pandemic. 

The pandemic has pushed millions of people indoors causing a surge in demand for PCs and tablets, these gadgets and appliances require these semiconductor chips to function as well. As the automotive sector and others are catching up now and are starting to reclaim the capacity they had given up, there is now competition for the chips.

Automobile manufacturers around Europe are feeling the burn due to this crisis. The French association was betting on a growth in car sales in the range of 9% to 10%, after the sales have plummeted significantly last year, to 1.65 million from 2.21 million the year before. 

The situation is also the same for Volkswagen Group, which has been forced to cut down factory hours, as they had to scale down production. If the crisis is prolonged further than the assumed second quarter of 2020, it is likely to hamper the move towards going completely electric as VW has aimed to do by 2025.

Bangladesh on the other hand still does not manufacture vehicles on a global scale, which now seems like a blessing in disguise. However, the nation is going big on manufacturing mobile handsets for the last couple of years. 

Around 37 million handsets were made in Bangladesh over the past one and a half years making the handset market worth over $1.2 billion. This huge industry is set to be affected by the global shortage of semiconductor chips. 

US and China trade dispute

Last September, the United States government imposed sanctions on Semiconductor Manufacturing International Corporation (SMIC)—which is the biggest chip manufacturer in China. 

This has caused the manufacturers to use other plants such as Taiwan Semiconductor Manufacturing Company Limited (TMSC) and Samsung who are already manufacturing at their full capacity. This has also caused a rise in prices of all products that are dependent on the use of these chips.

As the relationship between the two countries remains tense, big-name computer chip manufacturers such as Foxconn are considering investing in South Asia, especially in countries like Vietnam. Policymakers in Bangladesh should attempt to take advantage of this situation and attract companies like these to invest here. 

The unprecedented shortage has also impacted industries that include video game consoles as well. World’s biggest video game console manufacturer Sony has warned that the shortage of gaming units will last until the chip shortage is sorted. The pandemic has caused a significant increase in demand in the gaming industry as more consumers have stayed home—leading to an increase in the popularity of these consoles.

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