The trade bans and component purchasing restrictions on Huawei have backfired on the United States as well. Huawei is trying to save its business by stockpiling chips and a company of that size can buy a vast amount of electronic components leaving US makers without.
Modern cars have lots of electronic computers, control and communications systems in them. Some global car makers that can't get enough chips are cutting production numbers by tens of thousands of vehicles a month, or mothballing plants for months on end.
It doesn't help that the Renesas plant in Japan that makes chips for the car industry caught fire in March, was badly damaged and had to restrict operations.
Then there's the Covid-19 pandemic disrupting supply chains worldwide and increasing demand for computers, displays and peripherals as staff need gear for remote work during lockdowns, and entertainment at home.
High end video cards which were already under demand pressure from cryptocurrency miners go for substantially more than retail cost, with price inflation matching or exceeding the Auckland property market.
Gartner says buying chips currently is a bidding game, with panicked purchasers having to stump up three times the normal prices.
The chip shortage means not just higher prices for retail and business users, but less choice (I had to buy a Mac with just 8 gigabytes of memory instead of the 16 GB I wanted; woe!) and ridiculously long delivery times.
New vehicle buyers may have to wait four to six months for their hoopties to be delivered for example. You can imagine what that will do to used car prices as well.
There's no quick and easy fix on the horizon either. Building foundries for chip wafers and plants that assemble them into electronic components is very expensive with complex, high precision machinery and skilled labour that's not easily found.
A complicating factor is the demand for chips to be made with increasingly smaller and finer processes for better performance and lower power consumption.
Apple is down to 5 nanometres, which is five millionths of a millimetre; there are now two and even one nanometre chips planned by IBM and Apple's Taiwanese supplier TSMC, which is amazing.
The downside to such nanoscale electronics is that they're very hard and increasingly expensive to make.
Semiconductor plants' water and power consumption is massive and requires very careful environmental planning as well, and a large ecosystem of subcontractors and suppliers of materials and assemblies.
All of the above means there's considerable inertia for increasing production; semiconductor makers also have to weigh up if it makes sense to spend so much money if the increased production drives prices down and potentially jeopardises return on investment in the process.
Nevertheless, Intel is taking a punt on demand remaining strong and announced that it will drop $28 billion [my emphasis] on two new chip plants in Arizona. Taiwanese companies are also talking about similar investments.
Before anyone asks, no, this is not a league in which New Zealand can play.
Optimistic estimates point to the chip shortage being resolved by the end of 2022, but it could last until 2023 before supply catches up with demand.
That's a very long time.
New Zealand, which imports mostly ready-assembled goods manufactured elsewhere, is highly exposed to the flow-on effects from the global chip shortage.
If they haven't already, local companies that depend on such imports need to get creative with diversified supply bases and delivery guarantees, or they could get hit hard as the chip shortage continues to bite and larger buyers are prioritised.
