Global chip shortage not over, warns IDC

Global chip shortage isn’t over yet as IDC analyst points to Russia’s war in Ukraine impacting raw materials and global supply chain

The global chip shortage is far from over and IT spending, especially in the consumer sector, is showing signs of recession.

This is according to a senior analyst at IDC, who was interviewed by CNBC’s “Squawk Box Asia”Tuesday this week.

The world has been struggling with a shortage of chips for some time, which has hit some industries, such as car manufacturing, hard. This, coupled with the massive supply chain disruption caused by the coronavirus pandemic and Russia’s illegal war in Ukraine, has compounded the problems.

Chip shortage

Speaking to CNBC, Vinay Gupta, director of research for the International Data Corporation in Asia-Pacific, warned that the global chip shortage is not over and that the war in Ukraine continues to put pressure on the supply of key components.

“The supply of semiconductors will not increase immediately. There are a lot of raw materials, gases, that were needed to produce those semiconductors,” Gupta said.

Citing supply chain challenges posed by Russia’s war in Ukraine, Gupta said the two countries are capturing much of the market share, with Russia and Ukraine being the top exporters of krypton — a gas used in the production of krypton. potato chips.

Ukraine is also known as the world’s largest supplier of neon, essential to the chip manufacturing process and used for lasers, also known as lithography, where machines cut patterns into small pieces of silicon

Indeed, half of the world’s supply of neon is said to come from Ukraine, and in March Ukraine’s two main suppliers of neon (Ingas and Cryoin) ceased operations amid Russia’s unprovoked aggression in the country.

The gas, a by-product of steel production in Russia, is reportedly purified in Ukraine before being exported.

IT expenses

Supply chain disruptions and rising costs will also mean that “the average selling price of the devices will increase and infrastructure providers will pass this on to customers,” added IDC’s Gupta.

And Gupta also added that rising inflation and expectations of more monetary tightening are already causing a “consumer-led slowdown”.

“IT spending, especially consumer IT spending, is showing signs of recession,” Gupta told CNBC.

While spending on enterprise IT – including software services, cloud and IT services – continues to hold up, inflation has pushed companies to “protect their IT budgets now”.

Coupled with rising interest rates around the world, this slowdown will “bite,” he added.

“But the hope is that this will be a superficial slowdown as the government and central banks try to balance rising inflation and … interest rates,” Gupta added.

Economy worry

The warning from IDC’s Gupta comes amid signs that tech companies are beginning to tighten their fiscal belts amid concerns about the global economy.

Earlier this week, Bloomberg reported that Apple is delaying hiring and publishing in 2023 for certain teams.

Meanwhile, Google CEO Sundar Pichai warned staff in an email last week that Alphabet plans to slow hiring and consolidate investments through 2023.

Microsoft recently confirmed that it had begun cutting less than 1 percent of its jobs as part of a structural adjustment, after warning management of its Windows and Office divisions in May to take a more conservative approach to hiring. new people.

Facebook parent Meta Platforms earlier this month cut the target for adding software engineers this year from 10,000 to about 6,000 to 7,000.

Tesla, meanwhile, is already restructuring its operations and is slashing 10,000 jobs after Elon Musk announced he had “a super bad feeling” about the economy and planned to cut its workforce by 10 percent and “all to stop hiring worldwide”.