Global Chip Shortage Undermines Post-Pandemic Credit Recovery

The global economy currently faces multiple supply chain challenges, but the global semiconductor shortage is one of the most pressing.

As with many production shortages, this is the result of a perfect storm of apparently unrelated factors: trade wars and sanctions, COVID-linked supply squeezes, growing demand for chip-driven products, the short-lived Suez blockage, cold weather in Texas (with impacts on Samsung, Infineon, and NXP) and a factory fire in Japan (shutting down Renesas Electronics).

The shortage is hitting car manufacturing, with the majors announcing temporary factory closures; it has curbed iPad and MacBook production but – oddly – not iPhones; and it is likely to push up prices of the growing number of smart household goods, in addition to the overall cost of automation. With the inexorable need for more chip speed and memory by the telecoms and server farm industries while economies attempt to exit from lockdowns, this shortage is likely to get worse before it gets better.

The credit impact is obviously negative for many firms, but there may also be some winners: some chip manufacturers could see margins expand, albeit on reduced volumes. Figures 1 and 2 below compare the credit status and recent trends for some of the largest producers and consumers of semiconductors globally [please continue below to access full report].

Figure 1: Sample of major semiconductor manufacturers

Auto manufacturers are a high-profile casualty of the semiconductor shortage – for more detail on credit trends in that sector, see the recent CB Insight report.

Credit Benchmark data is now available on Bloomberg – high level credit assessments on the single name constituents of the sectors mentioned in this report can be accessed on CRPR or via CRDT . Get in touch with us to request your free trial for Credit Benchmark Premium Data and Analytics on Bloomberg.

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    Credit Benchmark brings together internal credit risk views from over 40 leading global financial institutions. The contributions are anonymized, aggregated, and published in the form of consensus ratings and aggregate analytics to provide an independent, real-world perspective of credit risk. Risk and investment professionals at banks, insurance companies, asset managers and other financial firms use the data for insights into the unrated, monitoring and alerting within their portfolios, benchmarking, assessing and analyzing trends, and fulfilling regulatory requirements and capital.