Semiconductor Shortage Squeezes Automakers as Chip Demand Surges Like Never Before
[showmodule id=”58959″]
A shortage of semiconductors is sweeping the economy as demand for connectivity surges in the wake of the coronavirus pandemic.
Companies including General Motors (GM), Ford Motor (F), Apple (AAPL) and Enphase Energy (ENPH) have mentioned difficulties obtaining chips in their quarterly reports this earnings season. GM said the problem may reduce full-year earnings by as much as $2 billion.
The shortage results from supply-and-demand issues. The initial wave of lockdowns last March and April shuttered car plants. Semiconductor companies reduced production of automotive chips to meet surging demand for PCs as millions of people worked and studied from home. Now, as vehicle sales rebounds, chip factories are struggling to keep up.
“This supply-demand imbalance cannot be remedied with the ‘flip of a switch’,” Falan Yinug of the Semiconductor Industry Association said in a blog post last week. “Making a semiconductor is one of the most complex manufacturing processes. Lead times of up to 26 weeks are the norm in the industry to produce a finished chip.”
Semiconductor Capital Spending
Research firm IHS Markit estimated last week that the current squeeze will last through the third quarter. That means semiconductors are likely to remain one of the most active corners of the market for months into the future.
A takeaway for investors could be to focus on the semiconductor-equipment companies that provide machinery and supplies. Those may benefit most directly as chip makers invest to expand production. Already, giant chip foundry Taiwan Semiconductor (TSM) has pledged to spend at least $25 billion on new capacity this year.
In conclusion, the chip industry was surging even before coronavirus. Like many things tech-related, demand has only improved in the last year. Investors may want to follow some of the companies exposed to the trend.
David Russell is VP of Market Intelligence at TradeStation Group. Drawing on two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial.
Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them apprised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.
Money is flowing back into stocks as investors hope for a better inflation report this week. The S&P 500 rose 1.9 percent between Friday, May 3, and Friday, May 10. It was the third straight positive week. More than four-fifths of the index's members advanced,...
Oracle jumped to new highs almost two months ago. Now, after a pullback, the software giant may have found support. The first pattern on today’s chart is the gap higher on March 12 after earnings surprised to the upside. ORCL retraced the move and is starting to...
Most of the big earnings reports have now occurred, and so far they've done little to boost the market. Companies like Microsoft (MSFT), Meta Platforms (META), Netflix (NFLX), Caterpillar (CAT) and Intel (INTC) reported profits above Wall Street estimates. However...
Leaving TradeStation
You are leaving TradeStation.com for another company’s website. Click the button below to acknowledge that you understand that you are leaving TradeStation.com.
This event is hosted on YouCanTrade. The information for this event is being provided for informational and educational purposes only.
You are leaving TradeStation Securities and going to YouCanTrade. YouCanTrade is an online media publication service which provides investment educational content, ideas and demonstrations, and does not provide investment or trading advice, research or recommendations. YouCanTrade is not a licensed financial services company or investment adviser and does not offer brokerage services of any kind.
TradeStation Securities, Inc. provides support and training channels hosted on YouCanTrade, its affiliate. Other than these support and training channels, any services offered by YouCanTrade are not sponsored, endorsed, sold or promoted by TradeStation Securities and it makes no representation regarding any YouCanTrade goods or services.
To acknowledge you are leaving TradeStation Securities to go to YouCanTrade, please click
This website uses cookies to offer a better browsing experience and to collect usage information. By browsing this site with cookies enabled or by clicking on the "ACCEPT COOKIES" button you accept our Cookies Policy. To block, delete or manage cookies, please visit your browser settings. Restricting cookies will prevent you benefiting from some of the functionality of our website.ACCEPT COOKIES