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Further hike in tech prices forecast as chip shortage lingers

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Global chipmaker Intel says it could take a couple of years for the electronic component shortages in the semiconductor ecosystem to be resolved, inciting concerns of a further increase in tech prices.

A huge global demand for tech products, accelerated by the COVID-19 pandemic – combined with supply chain disruptions – has led to massive shortages in the semiconductor ecosystem that has placed a huge strain on global supply chains around the world.

In some areas, the decrease in ICT supply has been caused by manufacturers redirecting their manufacturing processes to focus on mass production of personal protective equipment, as demand from governments across the globe soars, resulting in skyrocketing prices of tech devices.

Speaking at Intel’s virtual Computex Conference on Monday, CEO Pat Gelsinger noted the work and study from home trends since the onset of the COVID-19 pandemic have led to a "cycle of explosive growth” in semiconductors, shuttering the global consumer electronics industry, according to Reuters.

While the global chipmaker has been working diligentlyto address the current chip shortage together with partners, Gelsinger pointed out it could still take a couple of years for the ecosystem to address shortages of foundry capacityand components.

The company has doubled its internal manufacturing capacity in the past four years, he added, and invested $20 billion in its foundry capability to drive large-scale capacity expansion in Arizona andNew Mexico, with plans to expand to other locations in Europe and the US.

In April, the world’s largest electronics manufacturer, Taiwanese multinational Foxconn, confirmed that component shortages are expected to linger until mid-2022, hinting at skyrocketing prices as a knock-on effect takes its toll.

The increasing global demand for a range of computing products, including the power chips that manage power consumption in mobile phones; semiconductors that are the essential building blocks used to make computers and gaming consoles; coupled with a perfect storm of disruptions within manufacturing and transportation logistics, have also led to much frustration in the local distribution channel.

In an interview with ITWeb, Acer Africa GM and consumer lead Glenn Du Toit noted the shortage of computer chips, which coincided with the soaring demand for tech products, have wreaked havoc in the local electronics and mobile channels, resulting in a huge dent in the PC maker’s revenue.

Intel CEO Pat Gelsinger.
Intel CEO Pat Gelsinger.

Local distributors Mustek,Rectron South Africa and Homemation told ITWeb last month that the severe shortage has led to a ripple effect across all industry verticals, resulting in a shortage of laptops, tablets, printing and scanning equipment and peripherals, among other products.

The crisis, which has forced many local retailers to sell products well above the manufacturer’s suggested retail price, has been dubbed the worst electronic component shortage in SA in 30 years.

“In my 34 years of working within the IT industry, I have never experienced or seen such shortages,” said David Kan, CEO of Mustek. “As a result of the shortages, pricing has gone through the roof.”

Kan pointed out the estimated time of product arrival has been unclear and the goalposts keep changing, resulting in suppliers having to proactively forecast with Mustek, and customers experiencing extreme frustration.

Software and hardware ICT distributor Rectron South Africa had also reported huge shortages of CPUs, GPUs and processors – noting the further down the distribution channel, the more products are being affected.

The local smartphone industry has also been affected, with telcos MTN, Vodacom and Cell C confirming to ITWeb last month that local iStores were battling to secure sufficient iPhone stock, as higher demand and supply chain constraints caused by the pandemic have resulted in a shortage of some iPhone 12 models.

In March, Samsung warned it might skip the launch of the next Galaxy Note smartphone due to disruptions caused by the supply chain shortages.

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