An analyst with International Data Corporation said the global chip shortage will continue and consumers will pay the price.
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The global chip shortage An analyst told CNBC on Tuesday that it’s not over yet and the war in Ukraine continues to strain supplies of vital parts needed.
“Semiconductor supply will not increase immediately. There are many raw materials, gascapital required to manufacture those semiconductors,” Vinay Gupta, Asia-Pacific research director at International Data Corporation told CNBC.Squawk Box Asia. “
Citing supply chain challenges due to Russia’s War in UkraineGupta said the two countries account for a large share of the market, with Russia and Ukraine being the biggest exporters of krypton, a gas used in chipmaking.
Neon is also vital to chip manufacturing and is used for lasers, known as lithography, where machines engrave patterns onto tiny pieces of silicon created by SAMSUNG, Intel and TSMC.
More than half of the neon lights in the world manufactured by several companies in Ukraine, according to Peter Hanbury, a semiconductor analyst at research firm Bain & Co.
Semiconductors are used in everything from cell phones and computers to cars and home appliances.
Supply chain disruptions and increased costs also mean that “the average selling price of devices will go up and infrastructure providers will then pass it on to customers,” Gupta added.
‘Signs of recession’ for consumer spending
Rising inflation and expect more monetary tightening Gupta said it caused a “consumer-led slowdown”.
“IT spending, especially consumer IT spending, is showing signs of slowing down.”
While corporate IT spending – including software, cloud and IT services – has continued to hold, inflation has boosted businesses. to “protect their IT budget now.”
Coupled with rising interest rates around the world, this decline will be “unpleasant”, he added.
“But expect that this will be a shallow slowdown, because governments and central banks are trying to strike a balance between rising inflation and … interest rates,” Gupta added.
Last week, statements from two officials suggested that the Federal Reserve was on the way another strong interest rate hike in July and perhaps in September, even if it slows the economy.
In June, the Fed approved 75 basis pointsor 0.75 percentage points, rising to the benchmark borrowing rate, the biggest increase since 1994.
Hiring slow, spending less in Asia
On Tuesday, Bloomberg reported Apple’s plan to slow hiring and spending growth next year in response to a possible downturn. Gupta said a “similar trend” would be observed across Asia’s tech sector as a whole.
“I believe that will be a trend that we will start to see [in] late 2022 or early 2023 if the situation does not improve. “
“If we talk about IT services in Asia, most of them are feeling pressure on profit margins because of increasing wage costs and skills gap … in the market.”
In India, for example, tech giants’ profit margins were “slightly lower, despite hiring more in the first quarter,” Gupta added. But this may not last.
“Many businesses have turned to new digital technologies due to the pandemic, allowing their employees to work from home, so [there were] lots of new digital transformation projects,” he said.
“But we’re going to start to see some pressure on margins because obviously corporate earnings are going to take a hit, if we see the whole scenario play out like you’re seeing right now. “
