Why is there a global chip shortage and why should you care?

RAM memory chips are shown in this illustration photo. (REUTERS files)
RAM memory chips are shown in this illustration photo. (REUTERS files)
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Updated 02 April 2021

Why is there a global chip shortage and why should you care?

Why is there a global chip shortage and why should you care?
  • Consumers have stocked up on laptops, gaming consoles and other electronic products during the pandemic, leading to tighter inventory.
  • Sanctions against Chinese tech companies have further exacerbated the crisis

BENGALURU, India: From delayed car deliveries to a supply shortfall in home appliances to costlier smartphones, businesses and consumers across the globe are facing the brunt of an unprecedented shortage in semiconductor microchips.

The shortage stems from a confluence of factors as carmakers, which shut plants during the COVID-19 pandemic last year, compete against the sprawling consumer electronics industry for chip supplies.

Consumers have stocked up on laptops, gaming consoles and other electronic products during the pandemic, leading to tighter inventory. They also bought more cars than industry officials expected last spring, further straining supplies.

Sanctions against Chinese tech companies have further exacerbated the crisis. Originally concentrated in the auto industry, the shortage has now spread to a range of other consumer electronics, including smartphones, refrigerators and microwaves.

With every company that uses chips in production panic buying to shore up stocks, the shortage has squeezed capacity and driven up costs of even the cheapest components of nearly all microchips, increasing prices of final products. Automobiles have become increasingly dependent on chips — for everything from computer management of engines for better fuel economy to driver-assistance features such as emergency braking.

The crisis has forced many to curtail the production of less profitable vehicles. General Motors Co. and Ford Motor Co. are among the big carmakers who said they would scale down production, joining other automakers including Volkswagen AG, Subaru Corp, Toyota Motor Corp. and Nissan Motor Co.

A shortage of auto semiconductor chips could impact nearly 1.3 million units of global light vehicle production in the first quarter, according to data firm IHS Markit.

IHS said a fire at a Japanese chip-making factory owned by Renesas Electronics Corp, which accounts for 30 percent of the global market for microcontroller units used in cars, has worsened the situation.

Severe winter weather in Texas has also forced Samsung Electronics Co. Ltd, NXP Semiconductors and Infineon to shut down factories temporarily. Infineon and NXP are major automotive chip suppliers, and analysts expect the disruptions to add to the shortfalls in the ailing sector.

At the root of the squeeze is the under-investment in 8-inch chip manufacturing plants owned mostly by Asian firms, which means they have struggled to ramp up production as demand for 5G phones and laptops picked up faster than expected.

Qualcomm Inc, whose chips feature in Samsung phones, is one major chipmaker struggling to keep up with demand. Apple Inc’s major supplier Foxconn also warned of the chip shortage affecting supply chains to clients.

The majority of chip production occurs in Asia currently, where major contract manufacturers such as Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) and Samsung handle production for hundreds of different chip companies.

US semiconductor companies account for 47 percent of global chip sales, but only 12 percent of global manufacturing is done in the United States.

Factories that produce wafers cost tens of billions of dollars to build, and expanding their capacity can take up to a year for testing and qualifying complex tools.

US President Joe Biden has sought $37 billion in funding for legislation to supercharge chip manufacturing in the country.

Currently, four new factories are slated in the country, two by Intel Corp. and one by TSMC in Arizona, and another by Samsung in Texas.

China has also offered a myriad of subsidies to the chip industry as it tries to reduce its dependence on Western technology.


Egyptians the biggest winners among Dubai property buyers

Egyptians the biggest winners among Dubai property buyers
Updated 57 min 15 sec ago

Egyptians the biggest winners among Dubai property buyers

Egyptians the biggest winners among Dubai property buyers
  • Dubai house prices were up 1 percent in the second quarter of 2021
  • 128 sales of homes worth over $5.45 million in the first half of 2021

DUBAI: Egyptians have been the biggest winners when it comes to buying property in Dubai over the last few years when currency fluctuations are taken into account, according to research by real estate consultancy Knight Frank.

While the overall Dubai market is 26.3 percent down from its peak, house prices were up 1 percent in the emirate during the second quarter of 2021, the report said. That’s the biggest quarterly gain since the summer of 2014, according to Reuters.

However, the value of properties over the last six years differs depending on the nationality of buyers, or the currency they paid in, with Egyptians and Pakistanis the big winners and Europeans and Jordanians the biggest losers.

“Egyptian pound purchasers for instance have seen their investments appreciate by an impressive 51.4 percent, while Pakistani rupee buyers are currently enjoying gains of over 12 percent,” Faisal Durrani, partner and head of Middle East research at Knight Frank, said in a press statement of the valuations for different currency buyers compared to 2015.

“And if we rewind further back in time to the heady days of 2007, Egyptian and Pakistani buyers would have seen their investments increase in value by a staggering 200 percent plus,” he said. “European buyers meanwhile would be looking at gains of 20.5 percent since 2007, while for British buyers, it would be nearer 68 percent. The flipside to the story is of course some of those who held off, or were unable to step onto the property ladder, relative prices are much more attractive today than they were in 2015.”

Knight Frank’s research found that for euro buyers a home in Dubai is now 32.3 percent cheaper than in 2015, followed by British sterling (19 percent cheaper) and Indian rupee buyers (14 percent cheaper).

Earlier this week, the UAE press was awash with reports of a $30 million sale of a villa on Palm Jumeirah, the most expensive ever sold on the manmade island. Moreover, research by Knight Frank showed there has been an increase in sales of high-end luxury homes in Dubai.

The data showed there were 128 sales of homes worth over 20 million dirhams ($5.45 million) in the first half of 2021, the highest level since 2015 when 137 deals were recorded and compared with just 75 last year and 71 in 2019.

“Rather than subdue super prime sales activity, the pandemic has accelerated it,” Durrani said. “Families are looking for larger homes, with more outdoor space and even room for a home office as many are hedging their bets on greater remote working going forward, echoing what we have been seeing elsewhere in the world. And what’s more, they are willing to spend more for the privilege.”


Gazprom to pay $412m in advance to use Saudi-built Bulgarian pipeline

Gazprom to pay $412m in advance to use Saudi-built Bulgarian pipeline
Updated 28 July 2021

Gazprom to pay $412m in advance to use Saudi-built Bulgarian pipeline

Gazprom to pay $412m in advance to use Saudi-built Bulgarian pipeline
  • Bulgartransgaz to use $278 million of proceeds to make advance payments to Saudi-led group Arkad

SOFIA: Russia’s state gas company Gazprom has agreed to pay 349 million euros ($412 million) in advance for capacity on the Bulgarian extension of the TurkStream gas pipeline, Bulgarian state network operator Bulgartransgaz said on Tuesday.
Bulgartransgaz said it would use 461 million levs ($278 million) of the proceeds to make advance payments to Saudi-led group Arkad, which built the pipeline for 1.1 billion euros.
Gazprom’s export unit Gazprom Export has agreed to pay upfront for booked capacity from July 1, 2021 until June 30, 2023, Bulgartransgaz said in a statement.
Bulgaria’s 474 km gas pipeline, which transports Russian gas from its southern border with Turkey to its western border with Serbia — providing a link to the Russia-backed TurkStream twin pipeline to Serbia and Hungary, became operational in January.
The Bulgarian gas network operator will also use the money to cover 65 million euros in loans to commercial banks.
Bulgaria meets most of its gas needs with supplies from Gazprom.


Changan sees boom in demand as Saudis fall in love with Chinese car brands

Changan sees boom in demand as Saudis fall in love with Chinese car brands
Updated 28 July 2021

Changan sees boom in demand as Saudis fall in love with Chinese car brands

Changan sees boom in demand as Saudis fall in love with Chinese car brands
  • ‘Prices and technology are among the factors behind rise in popularity’

DUBAI, RIYADH, JEDDAH: A decade ago, if you would have asked a Saudi whether he would consider buying a Chinese car, the answer most likely would have been no, but this has now changed.

Saudi Arabia is emerging as one of the most attractive markets overseas for Chinese car brands as they grab the attention of dealers and drivers in the Kingdom.

Car sales in China, the world’s biggest market, were down 3 percent year-on-year to 2.13 million in May, ending a streak of 13 months of growth, mainly due to a global chip shortage and increased raw material prices. Last year, despite the coronavirus disease (COVID-10) pandemic, the data showed that sales continued to surge, and at the end of 2020, Changan’s share of the market had risen to 4.3 percent, moving it two places up in the annual car brand rankings to eighth most popular.

Mohammed Ramady, an independent economist and former professor of finance and economics at King Fahd University of Petroleum and Minerals, believes Chinese cars are proving popular because they appeal to medium- and lower-income families. He said the data showed that last year, around one in 10 Chinese cars were shipped to Saudi Arabia. A clear example of the growing popularity of Chinese cars in the Kingdom is the experience of the Changan brand. According to sales data compiled by Bestsellingcarsblog.com, the carmaker, which is owned by the Chinese state, captured 2.3 percent of the Saudi market in 2019, making it the 10th most popular car brand in the Kingdom just a few years after it was introduced to Saudi drivers.

Similarly, data from Google showed that searches for the term Changan increased nearly 50 percent year-on-year in the first half of 2021, peaking in January when the brand opened its service center in Riyadh. 

Dammam-based Wafi Al-Ghanim, marketing communication manager at Almajdouie Changan, the official distributor of the brand in Saudi Arabia, told Arab News there are three reasons the brand has quickly proved so successful: “Prices, quality, and warranty periods.”

“When you think about quality and specifications compared to the price in the car sector, you will definitely find that Chinese cars are far ahead of their counterparts in general, Japanese and Korean cars in particular,” Al-Ghanim said.

Looking to the future, he believes that Chinese cars across the board will continue to see strong growth and by 2022 will have captured 15 percent of the Saudi market, which “in a huge regional market is very good.”

One of the ways to boost sales is physical visibility. In January, Almajdouie built a 2,640-square-meter service center in Riyadh.

“We have had to raise the level of our services to match the high level of Changan cars, as well as to enhance the growing demand for Changan cars in the local market,” Yousef bin Ali Almajdouie, president of Almajdouie Group, said in a press statement at the time.

A report by the China Daily newspaper estimated that around 55,000 Changan cars have been sold in Saudi Arabia up to May this year, but it is not the only Chinese brand that has captured the attention of drivers in the Kingdom.

FASTFACTS

• Last year, despite the coronavirus disease (COVID-10) pandemic, the data showed that sales continued to surge, and at the end of 2020, Changan’s share of the market had risen to 4.3 percent, moving it two places up in the annual car brand rankings to eighth most popular.

• According to data, the carmaker, which is owned by the Chinese state, captured 2.3 percent of the Saudi market in 2019, making it the 10th most popular car brand in the Kingdom just a few years after it was introduced to Saudi drivers.

• An example of the growing popularity of Chinese cars in the Kingdom is the experience of the Changan brand.

Hongqi, one of China’s oldest luxury car brands, this month opened its first sales center in Riyadh, with plans to expand the network to Jeddah and Dammam.

“The market in the Middle East is key for Hongqi. And the Saudi market is crucial in the region,” Ma Zhenduo, general manager of Hongqi’s Middle East division, told Xinhua, the Chinese state news agency. “The sales have exceeded all our expectations across all the models,” said Mohammed Abduljawad, chairman of Universal Motors Agencies, Hongqi’s local partner in Saudi Arabia.

Hatem Khattab, the first marketing manager for FAW Bestune in Saudi Arabia, which sells the Chinese brands FAW, Bestune and Hongqi, told Arab News that the secret to the success of Chinese brands was the combination of price and technology.

“The manufacturers are very good at incorporating the latest technology in their cars. These are economic cars with state-of-the-art technology,” Khattab said. “The reason behind their popularity is their features, and now that they are seen more commonly on the streets, it has had a domino effect. Seeing the cars makes people think they are more reliable. They are affordable as well; we recently had a customer who bought 10 cars just for his family,” he added.

In addition to increased visibility on the roads, Khattab pointed out that Chinese brands also offer more options in terms of the range of models on offer.

“The competition in the automotive market here is huge, and I feel like the Chinese brands stepped up their game to meet the requirement of this cut-throat market. Currently, in Saudi Arabia, we have almost 20-25 Chinese brands as compared to brands of other countries that offer up to 10,” he said. Ramady said engine size was another big catalyst. Western, American, Japanese and South Korean models in the 2,500 to 3,000 cc engine sector still dominate the market, Chinese brands have positioned themselves in the 1,000 to 2,000 cc engine range, which is a growing segment in Saudi Arabia. He believes these models appeal “to a low to middle-income Saudi consumer market, especially during the ongoing COVID-19 pandemic and economic uncertainties, as well as a new niche market for Saudi female drivers owning their first cars.”

The statistics also back this up, according to Motory.com, one of the largest specialized car websites in Saudi Arabia. “Over the last few years, we have seen Chinese cars become increasingly popular with consumers, especially in Saudi Arabia. Online searches for Chinese cars on our Motory.com website have increased by around 400 percent between 2018 and 2020,” a spokesperson told Arab News.

Chinese carmakers saw exports increase by 103 percent year-on-year in the first five months of this year, according to a report by the South China Morning Post, citing data from the China Passenger Car Association. The way trends are going, many will find their way into Saudi garages and carparks, as the Kingdom continues to be a dominant source market. Fahad Al-Arjani, a member of the Saudi Chinese Business Council, echoed the view that technology was at the key factor, as Chinese brands have been “injecting investments in clean energy cars supported by the smartest technologies.” He pointed to the partnership between technology giant Huawei and the state-owned Beijing Automotive Industry Holding Co., Ltd. (BAIC) as an example.

“In addition to developing a highly efficient battery system, as well as emerging technologies, Huawei and BAIC’s first car will offer level three autonomous driving and will include 5G connectivity, which isn’t necessarily surprising given the Chinese company is a leader when it comes to the rollout of this new standard, which will make Chinese cars highly likely to lead the future of this sector for ages,” he told Arab News.


Lucid is ‘key step’ in PIF’s strategy after market debut

Lucid is ‘key step’ in PIF’s strategy after market debut
Updated 28 July 2021

Lucid is ‘key step’ in PIF’s strategy after market debut

Lucid is ‘key step’ in PIF’s strategy after market debut
  • PIF is believed to hold more than 60 percent of the stock after its 2018 cash injection into the start-up, giving it a paper profit of at least $15 billion

DUBAI: Saudi Arabia’s Public Investment Fund (PIF) has already made billions of dollars in profit on its investment in Lucid Motors, the California upmarket electric vehicle (EV) manufacturer, and could earn many billions more over the next five years.

PIF announced its first investment of SR3.75 billion ($1 billion) in Lucid in September 2018.

The sovereign wealth fund congratulated Lucid on its market debut and said on Twitter: “Our investment in Lucid Motors and the production of Lucid Air is a key step in the strategy for long term growth opportunities, supporting innovation and technology development, and doing revenue and sectoral diversification in Saudi Arabia.” Shares in Lucid raced to an 11 percent premium on the opening day of trading on New York’s Nasdaq Global Select Market on Monday, valuing it at more than $24 billion.  

PIF is believed to hold more than 60 percent of the stock after its 2018 cash injection into the start-up, giving it a paper profit of at least $15 billion.

This could go significantly higher if Lucid follows the model of rival EV maker Tesla. Elon Musk’s high-flying company reported better than forecast profits earlier this week, and saw its share price leap 2 percent, giving it a market value of $633 billion.

Lucid is at a much earlier stage of the EV road, but projections made by its management foresee a big rise in sales and profits ahead.

The company sees revenues of $2.2 billion next year after it has begun selling cars in substantial numbers, rising to $22.8 billion in 2026. By then, it will be selling 250,000 cars a year, making a profit of nearly $3 billion and generating free cash of $1.5 billion, according to the forecasts.

Peter Rawlinson, CEO and CTO of Lucid Group, who was a former chief engineer at Tesla, said that the company was “on track” to meet its projections after the Nasdaq debut.

“Lucid Air (the launch model) represents the next generation of electric vehicles and creates new standards for interior comfort, range, efficiency, and power,” Rawlinson said. 

“We are on track to meet our projected deliveries for the next two years, and we look forward to delighting our customers around the world with the best electric vehicles ever created.”

Lucid is likely to face more intense competition in the EV space than Tesla did when it launched its first model more than a decade ago, with other “legacy” manufacturers across the world launching electric products.

But Rawlinson is confident that superior design will give it an edge in the premium market segment. 

“We have got the best car in the world,” he told Arab News earlier this year.

Success for Lucid will be a big boost for PIF’s investment strategy, but it could also have significant industrial and commercial implications for the Kingdom. Lucid is likely to open a showroom in Saudi Arabia and there has been intensifying speculation that it will eventually build a production plant in the Kingdom, too.

Rawlinson said of PIF: “They put their faith in us, that is why we are here today thriving.”


Amazon denies plans to accept bitcoin payments

Amazon denies plans to accept bitcoin payments
Updated 27 July 2021

Amazon denies plans to accept bitcoin payments

Amazon denies plans to accept bitcoin payments
  • The electric carmaker’s balance sheet for the second quarter of 2021 showed a net digital asset value of $1.311 billion as of June 30

RIYADH: Bitcoin traded higher on Tuesday, rising 0.55 percent to $38,379.02 at 5:02 p.m. Riyadh time. Ether, the second most traded cryptocurrency, was down 1.3 percent to $2,298.85, according to data from CoinDesk.

Below is the latest cryptocurrency news:

Amazon has denied a British newspaper report that it plans to accept bitcoin payments this year. “Notwithstanding our interest in the space, the speculation that has ensued around our specific plans for cryptocurrencies is not true,” an Amazon spokesperson said on Monday. “We remain focused on exploring what this could look like for customers shopping on Amazon.”

According to a report from Bloomberg, the popular stablecoin Tether is under criminal investigation by the US Justice Department. Prosecutors are looking into whether Tether’s executives committed bank fraud, a development with potentially seismic consequences for the broader crypto market. Tether released a statement saying that the Bloomberg report follows a pattern of repackaging old claims as news, but did not deny awareness of the pending charges, according to CoinDesk.

Goldman Sachs is liquidating and settling cryptocurrency traded products for some of its hedge fund clients in Europe, it was reported last week. The investment banking giant has submitted an application to the US Securities and Exchange Commission for an exchange-traded fund (ETF) that would showcase public companies in decentralized finance and blockchain around the world. The filing indicated that the fund plans to invest at least 80 percent of its assets in companies that are developing blockchain technology and digitizing funding. The Securities and Exchange Commission is currently reviewing more than a dozen Bitcoin ETF applications and has approved decisions on several of them, CoinDesk reported.

Tesla released its second quarter earnings report on Monday. The electric carmaker’s balance sheet for the second quarter of 2021 showed a net digital asset value of $1.311 billion as of June 30. It also showed that Tesla owns $1.311 billion in bitcoin. The company did not buy or sell any bitcoin during the second quarter, but it did report a bitcoin depreciation of $23 million. Tesla’s action reaffirms Musk’s prior statement that neither he nor Tesla had sold their coins, according to Bitcoin News.

A survey conducted by the cryptocurrency exchange of the Independent Reserve Asia Pacific found that 43 percent of respondents said they own cryptocurrency, while 46 percent plan to purchase digital assets in the next 12 months.

The survey of 1,000 Singaporeans from a representative background of gender, age and location, also found that two-thirds of respondents in the 26-45 age group said they own cryptocurrency. Nearly 40 percent of respondents described bitcoin as an investment asset and 25 percent described it as a store of value. Three-quarters of respondents aged between 26 and 35 said they believe that cryptocurrency will become more widely accepted. Singapore’s financial authorities have confirmed that they are working with their French counterparts to explore cross-border applications of central bank digital currencies, according to a report by Cointelegraph.