A global semiconductor shortage is impacting stocks — these are the industries impacted…
Phones. Televisions. Cars. Everything good in the world runs on semiconductors — the material that goes into making the computer chips that powers your devices.
A global semiconductor shortage has led to rising prices that impacted an estimated 169 industries – with automakers being hit the hardest.
Semiconductors are the 4th most-traded (important) product on the planet
In the past year, supply chain issues caused by COVID and increased demand for electronic products led to a massive shortage of semiconductors – with everything from cars to toasters being affected. To make matters worse, a series of political conflicts/accidents worsened the shortage:
- Trade tensions with China restricted the sale of American chips to some Chinese companies – leading to hoarding of chips by suppliers.
- A fire at Japan’s Renasas’s Naka factory halted production at the company supplying ⅔’s of all auto chips.
No chips, no whips – the big semiconductor shortage
The shortage was expected throughout 2020 but the impacts are finally hitting.
- Ford ($F) reported an expected chip shortage last week that could cut $2.5b from its earnings – sending its stock down nearly 10%.
- NIO ($NIO), a Chinese electric vehicle maker, expects the shortage to drag down vehicle deliveries in the 2nd quarter
- But Tesla ($TSLA), the outlier, has been able to dodge the issues by quickly shifting its chips to a new microcontroller.
Global automakers are warning that they’re still months away from meeting demand while some chip producers like Intel are forecasting the shortage to last years. Despite the shortage, investors haven’t hit the panic button on car makers for two reasons:
- Shortages are likely to be temporary and manufacturers will make up production and sales in the next 12-18 months.
- Higher margins from a refocus towards producing higher-margin cars.
For investors… Stockpile on your favorite electronics
While automakers have been hit the hardest, if the shortage drags on, investors in other industries could start to feel the pain.
- Apple ($APPL) is expecting shortages to reduce its iPads and Mac sales by billions in the next quarter.
- Nvidia ($NVDA) and AMD ($AMD), two graphics card makers, are seeing supply shortages for the rest of 2021.
- Costco ($COST) and other retailers are having trouble sourcing TVs and other electronics, which could impact sales.
The semiconductor shortage goes beyond just cars and graphics cards, it’s likely impacting several companies in your portfolio.