Semiconductors are used in the manufacture of smartphones, desktop and laptop computers, data centers, home appliances, tablets, smart devices, automobiles, medical devices, ATMs, agricultural equipment and military equipment… These are just a sample of the industries that semiconductors enter into. connectors or silicon chips. Last year, the market value of these segments amounted to nearly half a trillion dollars, with Hong Kong accounting for the largest share, with exports worth 118 billion dollars. But the supply of chips is no longer as easy as it was in the past, as the future of this industry is shrouded in political uncertainty, in connection with what is happening between China and Hong Kong. This is in addition to the previous problems created by the Corona epidemic and the war in Ukraine.
John Ding, the Taipei government’s chief trade negotiator, says any Chinese military attack on Taiwan (the Chinese government says it wants peaceful reunification) will deepen the problem of semiconductor supply chains, especially as the world relies on Taiwan for chips used in electric cars. And mobile phones: “Any disruption to international supply chains, to the international economic system and to opportunities for growth, will be much greater due to the global shortage of quantities supplied in the market,” according to an interview with Archyde.com.
In any case, the global shortage of semiconductors caused huge losses in the auto industry, amounting to more than 200 billion dollars in 2021. The following year, some companies took precautionary measures. Some of them suspended part of the production lines, such as the Ford company, which focused its production capacity on assembling trucks that achieve a better profit margin. Others try to adapt to the crisis in different ways; Automakers use semiconductors from washing machines and rewrite the code to make it work in cars. Some companies even ship their cars without some chips, with promises to add them later.
With Corona, the Russo-Ukrainian war and political tension in Hong Kong, the European auto market recorded its worst five months in its history (with the exception of 2020) with only 3.7 million cars sold. Despite this decline in sales, car makers achieved profits in the first quarter of 2022 due to higher prices. Since the spring of 2021, the car market in Europe and America has been facing a series of logistical obstacles, including a shortage of semiconductors. As soon as the chip supplies began to stabilize from the beginning of this year, the Association of European Automobile Manufacturers expected a recovery in the car sales market in the second half of 2022, but these expectations were disappointed by the impact of the war in Ukraine.
Sales of “Volkswagen” declined by 19.6% in May on an annual basis, with a sharp decline in sales of its main brand “Volkswagen” and its other brands “Skoda”, “Audi” and “Seat”. Also, sales of “Stellantes” declined by 14.6%, with a significant decline in the sales of “Citroen”, “Fiat” and “Peugeot” brands.
Any Chinese military attack on Taiwan will deepen the semiconductor supply chain problem
The importance of semiconductors for global industries is demonstrated by the words of senior partner at McKinsey, Bill Wiseman: “There is despair in the market. If you’re building a $350,000 mass spectrometer, and you can’t ship it because you don’t have a 50-cent chip, you’re willing to do anything.” In some cases, this means desperate measures. Last month, Peter Wienen, chief executive of Dutch company ASML, which makes the intricate machines needed to make advanced computer chips, revealed that one major company had resorted to buying washing machines and taking the chips in their cars.
Automakers have taken advantage of rather than shutting down production lines. In September last year, Cadillac said it would remove hands-free driving from some cars. In November, Tesla began selling cars without USB ports. In May of this year, Ford said it would ship some models without chips for non-critical features like heating controls, and would ask dealers to add them at a later time.
