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The heavy toll that chip shortages have inflicted on global auto industry is now broadening to other sectors, S&P Global Ratings said in a report released on Tuesday.
"The chip shortage may cap the revenue growth of some PC and smartphone makers, and impede their ability to capitalise on surging consumption," said S&P Global Ratings credit analyst Clifford Kurz. Chip vendors also need to manage rising costs as fabs increase prices amid a surge in demand for their services. They should be able to largely pass on these higher costs to customers. Original equipment manufacturers that are unable to procure sufficient components to meet orders for their products will feel more pain. The report said supply issue is most severe in auto industry. Many carmakers have announced factory shutdowns and prioritised production based on an entity's ability to procure critical parts. Other sectors now also being squeezed include some smartphone manufacturers. Even some home appliance producers in China are reporting production issues related to chip shortages. "Our base case is that the spike in demand will ease in the second half of 2021, returning the supply chain to equilibrium. However, there's always a chance that demand does not abate or that a fresh supply shock could trigger yet more acute shortages," said Kurz. While we anticipate no ratings change related to the shortages for now, chip shortfalls will be the major variable affecting the revenues and profits of key global entities for at least the next 12 months. (ANI)
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