If you want to buy a computer, it’s now and that’s why

MacBook Pro laptops are shown at the Apple Store on June 27, 2019 in Corte Madera, California.

MacBook Pro laptops are shown at the Apple Store on June 27, 2019 in Corte Madera, California.

©Justin Sullivan/Getty Images North America/Getty Images via AFP

Price increase alert

Computer stocks are dwindling due to a shortage of semiconductors and shipping difficulties. Is this the right time to buy a computer?

Atlantico: With booking, remote work is becoming popular on a daily basis and the need for good computer equipment has become increasingly felt.How could a shortage of semiconductors affect the price of our computers?

Michael Roemi: The explosion in semiconductor sales has highlighted a trend that has been seen for years: users and companies are consuming data at a rate that far exceeds the capacity that semiconductor companies predicted. However, semiconductors are essential for many sectors. It is the fourth most traded commodity in the world in terms of import and export after crude oil, refined oil and automobiles.

The current situation can affect most companies more than individuals. They need these components to serve their customers, oversee operations, create and deliver products, etc., and all information is managed by their own data centers or by cloud service providers who need high-quality semiconductors. However, studies show that today some manufacturers have difficulty producing goods that work with simple processors (microwave ovens, refrigerators, washing machines, etc.). Smartphone manufacturers have faced similar problems. In the auto industry, some automakers have paused production of new cars and are implementing mitigation strategies (from diverting chip supplies to profitable vehicles to completing some cars without certain units in order to keep assembly lines running).

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But while the semiconductor industry has set records, it still faces capacity constraints. In addition to the product price increase, this means, for consumers, longer waiting times while more than 75 million PCs were sold worldwide in the first quarter of 2021 (+45% compared to the first quarter of 2020 – pre-pandemic)! Shortly after its release, Apple’s iPhone 12 Pro came with a three-week waiting period. Meanwhile, both Samsung and Xiaomi have warned of possible delays in their upcoming releases.

In this context, companies have developed new purchasing strategies: placing orders “as soon as they appear” (depending on needs) for confirmed acquisitions planned for the long term, especially since the shortage is global as it also concerns less advanced chips from which the major players in the sector have moved away in favor of advanced components higher margins.

With computer stocks dwindling, can global shipping meet demand? Will traffic between China and Europe operate normally in the event of a shortage?

Much like traffic congestion and its cascading effect, supply chain disruption in the fully operational semiconductor industry affects the entire supply chain.

The price of container ships has gone up quite a bit. Where importers paid US$2000 per container some time ago, the invoice can reach more than US$10,000 today. The dispute revolves around the sharp increase in European and American demand for goods from China, where production has rebounded faster than other countries. The problem is that there are currently not enough containers in China to transport these goods to the rest of the world and the health restrictions due to the health crisis are not helping to increase the supply (many containers are now blocked in different countries). Thus, with the additional reorganization of value chains and production interruptions, delivery times have doubled, which has an upward impact on Chinese import prices.

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However, the shortage of semiconductors is affecting many parts of the industry. This means a loss in operating margin for French companies, which could cost GDP growth in the eurozone and the United States. Europe and the United States have become aware of their dependence on Asian players who produce a significant portion of these ingredients. The two blocs are trying, each in their own way, to strengthen themselves in this field and increase their production capacities. While the absence of a European champion at the forefront of innovation in the field hampers the implementation of a strategy on a European scale, the supply crunch has been exacerbated by trade tensions between member states. US and China (policies to gradually restrict sales of chips designed/manufactured in the US to some Chinese buyers).

Should we fear for the French economy? These are cyclical tensions that need to be absorbed within a few months, all other factors being equal. It reflects a rebound in activity, even if the latter is, for the time being, stronger in Asia than in the United States or Europe.

When is the market expected to return to normal?

Despite the seemingly healthy results, the semiconductor industry wasn’t ready for the explosion in demand that unleashed it. Some surveys have found a discrepancy of 20-30% between orders and shipments – meaning sales could have been higher – due to shortages due to, among other things, the Covid-19 pandemic. Therefore, it must resolve itself.

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In addition, the PC market is doing well: sales increased sharply in the first quarter of 2021. This momentum should continue, especially with the arrival of Windows 11, which will prompt many users to reconfigure their Chromebooks .

However, since semiconductor production should not increase significantly, this shortage of semiconductors should continue until at least the end of the year or until the end of the first half of 2022, the likely date of a return to “normal”.

Faced with this, is it time to buy a computer now?

With the explosion of remote work, homeschooling, the acceleration of e-commerce, the need to take care of yourself at home, etc. Computer manufacturers have seen strong sales growth. Thus, future market growth will be largely driven by consumers, who will continue to purchase digital products, consume data and adopt “cloud services” at an unprecedented rate.

Since foundries can no longer supply everyone, it is impossible, without power components for batteries or without webcam sensors, to complete the manufacture of a laptop. However, developing new production capabilities usually takes years. This is why chip shortages will likely affect, in the short term, the availability and costs of electronic devices (computers, smartphones, and game consoles, as well as consumer products such as home appliances, home networking, and “wearables”), Which may fuel fears of a return to inflation.

However, money is almost not an issue these days. What matters is what we can expect to achieve. For some entry-level computers, an SD card reader or an Ethernet port has been phased out to save money due to the high cost of semiconductors affecting manufacturers’ profitability.

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