DailyPost 2249

The semiconductor has been going from one crisis after another, since the onset of COVID in a variety of ways. Not that this was the only industry impacted, mostly all industries were, but nature of this industry, global in its reach and all comprehensive in fallout, has its journey a rollercoaster ride. The main stakeholder has bore the brunt of the problem. The availability or the lack of it affect every industry and the delay which had become endemic to semiconductors could hang any economy on a balance. The customer finally was at the receiving end literally running from pillar to post, begging for chips.

When economies started getting into the doldrums or there seems to be a serious likelihood of it, can politics be far behind? The governments would try to resurrect as much as they can. First was the mad rush to become a fab hub, with legislations and doles and top chips manufacturers being cajoled by the countries who had thrown the hat in the ring. And now a new twist to the story, with politics more and more control on this industry at least in a few countries. The Biden administration announced restrictions. It announced that ”it would halt access to machinery, software, and support that Chinese chipmakers use to manufacture components at 14 nanometers or better.”

The industry which was apple of everyone’s eye has been giving reality check of late. There has been chipmakers sharp drop through the middle of the year, is said to be a stark reminder for investors, and the industry, to not take this sector for granted. Covid, heightened tensions across the Taiwan Strait and the harsher rules from Washington chipped $2 trillion off the chipmakers value. But now they are back again. There has been an extraordinary turnaround. This has helped replenish $600 billion to the value of these companies. This should not give us a feeling that this turn around has happened across the industry, it has not, some geographies and products are faring much better.

As per Bloomberg, investors have shown faith in companies with at least a market value of $1 billion, US sanctions notwithstanding. Chinese players have fared worse despite moves to ease Covid Zero and boost the local economy. The 14 nanometers ban has been with the intention that Beijing fails to catch up with US and its allies. This has been reflected in the mood of the market pertaining to Lam Research Corp., Nvidia Crop., Advanced Micro Devices Inc. The other way round by these moves China’s local chip players are likely to get a boost. Semiconductor sector globally found the weighted average return increase by 21% in the past one month. It still remains down by 30%. The climb has been more marked in companies with a market value of above $100 billion. As dust settles and tension cools and world leaders gather again, the very same reasons to fall in love with the chips start to re-emerge.

Sanjay Sahay

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