Semiconductor, Omicron and Inflation Typhoon… Super emergency for domestic companies

A typhoon of semiconductor shortages and omicron inflation is hitting the global market. The supply of semiconductors has not been resolved, and the prices of products and services are soaring due to production and logistics disruptions caused by the spread of the Corona 19 Omicron mutant virus. Domestic companies are also suffering from increased costs and setbacks in exports.

The U.S. Department of Commerce announced on the 25th (local time) that it will investigate abnormal high prices in some semiconductor fields based on the results of the semiconductor supply chain information request (RFI) analysis conducted last year. The Ministry of Commerce said, “There is a significant and persistent discrepancy in supply and demand for semiconductors.” Semiconductors for medical devices and vehicles, image sensors, and analog chips used in radio frequency are the items that the Ministry of Commerce is keeping an eye on. The Ministry of Commerce said, “The semiconductor shortage will not disappear for six months.”

US media, such as the Wall Street Journal (WSJ) and The New York Times (NYT), said that the announcement meant that the semiconductor supply shortage is a significant factor that aggravates US inflation. It is analyzed that if semiconductor prices soar, inflation throughout the industry is inevitable. In the industry, as the supply of semiconductors continues, it is known that the price inflation of middlemen, mainly system semiconductors, is serious. An industry official said, “There are cases where the price is 100 times the usual price,” and “even non-genuine chips are being distributed.”

The bottleneck in global port logistics has also intensified after the spread of omicron mutations. As the number of confirmed COVID-19 cases increases, the number of port workers has plummeted. Container freight rates continue to skyrocket as logistics services are not smooth. The Shanghai Container Freight Index (SCFI) hit an all-time high. As of the 21st, it was 5053.12, which is four times higher than on January 3 of last year.

Soaring logistics costs are leading to price hikes. Earlier this year, Starbucks and Ikea announced that they would raise prices for reasons such as rising logistics costs. It is predicted that the prices of electronics and food will also be affected. The International Monetary Fund (IMF) expects inflation this year to rise by 3.9% in developed countries and 5.9% in emerging and developing countries.

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Semiconductor shortage (supply shortage) acts as a factor in supply instability for automobiles, etc., and is acting as a factor in deepening inflation. The US government judges that production setbacks due to the shortage of semiconductors and the resulting increase in automobile prices account for one-third of the total inflation.

This is the background that the U.S. Department of Commerce announced on the 25th (local time) to investigate the abnormal semiconductor prices caused by the supply-demand mismatch caused by COVID-19. Domestic companies are nervous. There are also concerns about how the aftermath of inflation from semiconductors will affect.

○“Semiconductor Shortage is a perfect storm”

The U.S. Department of Commerce described the semiconductor shortage as a ‘perfect storm’ when it announced its policy to investigate areas with high semiconductor prices. It means that various adverse events such as a fire at a semiconductor factory, a winter cold wave, and Corona 19 occurred simultaneously. The Ministry of Commerce said, “In the next few weeks, we will contact the industry to solve problems specific to the semiconductor manufacturing process. We will look into allegations of unusually high prices in these processes.”

The reason that the US government has expressed its willingness to intensively investigate the semiconductor shortage is because of the semiconductor-induced inflation. The Joe Biden administration’s approval rating is at its lowest point, and it is analyzed that a large part of the cause is due to the influence of semiconductor shortage.

The consumer price index (CPI) of the United States rose 7.0% year-over-year in December of last year. It is the highest level in about 40 years since June 1982. December’s CPI rose 0.5% from the previous month, but used cars rose 3.5% during the same period. This is because used car prices soared as the production of American automakers was delayed due to a shortage of semiconductors. New cars are in a similar situation. According to Kelly Blue Book, a car rating company, the average selling price of a new car in the United States at the end of last year was $47,077. It rose 13.9% from the end of 2020 ($41,335).

It is also a concern that the semiconductor shortage is unlikely to end in the first half of this year. The Ministry of Commerce said industry insiders forecast that the supply-demand problem will not disappear within the next six months. The actual semiconductor chip inventory has recently fallen from 40 days in 2019 to less than 5 days. The shortage of analog chips used in medical devices and automobiles, power management and image sensors, and radio frequencies is particularly acute.

○ Is it sparking a spark as a domestic company?

Domestic companies are also nervous about the US government’s investigation policy. The announcement came after the US analyzed data submitted by about 150 semiconductor manufacturing and demanding companies around the world in November last year. An industry official said, “The results of the US investigation can serve as a basis for determining how domestic companies should respond to the semiconductor shortage.” Experts said, “Korea is also under pressure from rising prices of semiconductors,” and “Companies may suffer from cost pressures for supply and demand for semiconductors for a longer period of time.”

There is also interest in whether Samsung Electronics and SK Hynix will be investigated by the US government. It is fortunate that the US government is taking the issue of the analog chip shortage more seriously. This is because Samsung Electronics and SK Hynix mainly produce high-end, high-density, high-tech semiconductors.

However, it is burdensome that the price of foundry (semiconductor contract production) soared last year. Taiwanese TSMC and Samsung Electronics are reported to have raised their prices by about 30% last year. It is known that the number of semiconductors applied to self-driving cars and electric vehicles, which have seen rapid sales growth in recent years, is about 2,000, more than ten times that of internal combustion vehicles.

Another official in the industry said, “There is a possibility that Samsung Electronics and SK Hynix will once again clash with the US government over data submission. will,” he said.

Reporter Lee Soo-bin / Kang Kyung-min / Park Shin-young / Do Byung-wook lsb@hankyung.com