Chip Supply Shortage Will Last Through 2022: Foxconn

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A chip supply shortage has become a material issue, with several automakers warning of production hits from the paucity of semiconductors.

The problem is growing beyond carmakers and into the technology industry, according to Apple’s Taiwanese supplier Hon Hai Precision Industry, popularly known as Foxconn.

What Happened: Foxconn, which on Tuesday reported disappointing quarterly results, conceded on its earnings call that the shortage will hurt 10{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca} of its shipments, Nikkei reported.

The problem is more acute for home products that have been sought after by consumers amid the pandemic, the company said.

The impact of the chip crunch was not very evident in the first two months of the quarter but is beginning to show now, Foxconn chairman Young Liu said on the earnings call.

Citing analysts, Liu said the issue is likely to persist through at least the second quarter of 2022.

Apart from Apple, Foxconn also supplies big-name tech companies such as Alphabet, Amazon.com, and Microsoft.

Foxconn’s disclosure is therefore a negative read-through even for big companies that are known to have clout and bargaining power with suppliers, the Nikkei report said.

Why It’s Important: Warnings from automakers have been coming in thick and fast. North American legacy automakers and their European counterparts, as well as pure-play electric vehicle companies such as NIO Limited, have announced production cuts in the recent past, blaming the actions on chip shortages.

South Korean electronics giant Samsung warned earlier this month that a chip shortage will pose a problem to its business in the second quarter and hinted at skipping the launch of the next iteration of its Galaxy Note this year.

With indications suggesting a longer period of disruption than originally thought, a host of industries ranging from automobiles to consumer electronics will likely feel the pinch.

This could not have come at a worse time, as tech stocks are seeing a sell-off amid a rotation out of the sector.