Supply Chain Crisis - Impact (Part 1/2)
Supply-chain bottlenecks resulted in unprecedented shortages of daily items ranging from home goods and electronics to automobiles, food, and raw minerals.
Empty shelves may be disconcerting for buyers, prompting panic-buying sprees. It's frequently the first indication that something isn't quite right with the global supply chain. However, shortages are often signs of problems that have been plaguing the sector for months.
Coronavirus outbreaks caused havoc on the worldwide supply chain in 2020. Virus-mitigation measures that have been in place since then have hampered efforts to restore the supply chain to pre-pandemic levels.
Fears about COVID-19 spreading further in the workplace prompted some industry participants to limit worker doses. As a result of China's COVID-19 zero-tolerance policy, port terminals were briefly closed, causing backlogs at some of the world's busiest ports.
Reopening demand and stranded cargoes have produced supply chain bottlenecks just as the Christmas and Diwali shopping season begins across the world. It's also causing experts to lower their earnings forecasts for the following quarter. In reality, all industries that are not solely service or technology-driven will be affected by the supply chain problem, which is likely to last until next year. It has both positive and negative implications for a country like India.
Various sectors will be hit, as seen by the recent spike in energy stocks, but semiconductors, retail, raw material space, and chemicals will be the most heavily impacted.
Automobile Sector and Chip-making companies
Due to plant closures and longer delivery schedules, increased capacity in the semiconductor sector is expected to arrive only in the second half of 2022. A power outage in China might exacerbate the problem by forcing enterprises to close. However, with hubs like Malaysia reopening, some businesses' pricing power may be weakened, especially at a time when commodity costs like silicon are skyrocketing.
Prices for DRAM and NAND chips appear to have reached their pinnacle, and 12-month forward profit projections for chipmakers Samsung Electronics Ltd., Micron Technology Inc., and Intel Corp. have varied or dropped in recent months. Shares have dropped by 20% or more since their recent highs. This has a positive influence on the indigenous chip manufacturing industry. Dixon, for example, has had an 80% growth in sales this year, while Amber, a key LG electronics supplier, has seen a similar gain in sales and share price. On Tuesday, the stock prices of Dixon and Amber both increased by 3%.
In such an atmosphere, the automobile industry is struggling to stay afloat. Because of the supply scarcity, companies like Maruti Suzuki have reduced their output by 40%, which would be reflected in the company's PAT and operating margins. Only Toyota has been able to offset the damage since, following the flood in Japan, they adjusted their production technique and began hoarding chips and raw materials for 6 to 10 months after the event, which has proven to be valuable for them now. This year, they also saw a 1.4 percent rise in sales. TATA Motors, for example, has been looking for a new supplier of semiconductors.