COVID-19 outbreaks in Asia impacting shipping, chip supply chain
Brady Wang, Counterpoint Research Associate Director, joins Yahoo Finance Live to discuss disruption to global shipping and chip supply chain amid COVID-19 outbreaks in Asia.
ALEXIS CHRISTOFOUROS: A new wave of COVID-19 outbreaks in Asia is creating new bottlenecks in the global supply chain. It threatens to drive up prices. And it also weighs on post-pandemic recovery.
Here to talk about it right now is Brady Wang. He is an associate director at Counterpoint Research. Brady, thank you for being with us. Let's talk about the implications of this right now, these new cases we're seeing in Asia. I want to start with the global shortage of computer chips that we have. Does that only make things worse there?
BRADY WANG: Yeah. I saw the new wave of COVID-19 cluster infection in Taiwan set off an alarm in global semiconductor supply chains, including computer chips. I think Taiwan has managed to contain the virus for more than a year. This can lead to bottlenecks. But we never saw the interference.
KRISTIN MYERS: Well Brady, curious how long these disruptions could last. Do you see them decrease or get better? Or maybe they could get even worse in the future?
BRADY WANG: I think the supply and demand balance is getting better now. But the balance sheet is still very divided. As I said earlier, the cumulative cases since the COVID-19 outbreak in Taiwan in 2020 have only been around 1,000. But since the end of April, when the variant found its way through the national airline pilot, Taiwan has recorded more than 11,000 new cases within a few weeks. This, of course, is related to the other problems for chip supply.
ALEXIS CHRISTOFOUROS: Mm-hmm. Is that a big reason because vaccination rates are so low across Asia? And what does that mean not only for production, but also for consumer spending and the demand for these products directly in Asia?
BRADY WANG: Yeah, I think the vaccination rate in Taiwan remains low. Overall, I think about 3% of Taiwanese people have received the first dose so far. I mean [inaudible] the emergencies. We got the best from Japan and the USA. However, this is still far enough to maintain this vaccination coverage here.
KRISTIN MYERS: So it takes a notoriously long time to repair supply chains or to support them in any way. I am curious whether we just grit our teeth and endure what we are currently seeing. Or is there something that can be done to prop up some of these supply chains?
BRADY WANG: Yeah. So we can do it ... I mean, we have to make sure the supply is reliable now, right? And now we believe that right now in Taiwan there is - I mean, the supply chains are on the up, like the foundries, like [INAUDIBLE] is still fine. However, we need to make sure that supply is good enough due to the increased demand from the recovery of the economy, right?
ALEXIS CHRISTOFOUROS: Are there certain products that are better off in the supply chain that it is easier to get certain products than, for example, computer chips that were so difficult to find early on? in the pandemic?
BRADY WANG: At the start of the pandemic, I think 2020, with this pandemic outbreak, we see the computer chip becoming scarce due to the demand for home work and the demand for migration from 4G to 5G. Then we start to see the chip shortage. And the scarcity also spread to the others like the car chips. But now it looks like the balance between supply and demand is improving.
KRISTIN MYERS: Curious to know where the prices are going. We've talked a lot about how we see consumer goods prices, but also inflation, which we've seen across a wide range of industries. Where do you see the pricing on some of these breakouts? And do you think some of these price movements, at least upwards, are temporary?
BRADY WANG: Of course the prices are rising continuously. But now it's not a pricing issue. It is a problem if you can get the component chip. And all lead times, for example for the car or for the computer chips, have extended to half a year or even more than half a year in the last few quarters, haven't they? Now, of course, the price of a component is increasing. But the problem is that if you can get this component.
ALEXIS CHRISTOFOUROS: All right Brady Wang from Counterpoint Research, thank you for joining us today.
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