Global chip shortage offers silver lining to Saudi Arabia’s local industry

The shortage has pushed chip stocks to record highs, and analysts expect that chips will continue to be in short supply at least through the end of 2021

  
Semiconductor chip. Image used for illustrative purpose.

Semiconductor chip. Image used for illustrative purpose.

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RIYADH: A global semiconductor chip shortage as a result of the coronavirus disease (COVID-19) pandemic has increased the need for the Kingdom to boost its local production so it is less dependent on foreign manufacturers, a Kingdom-based IT expert said.

The shortage has pushed chip stocks to record highs, and analysts expect that chips will continue to be in short supply at least through the end of 2021.

Maribel Lopez, principal analyst at San Francisco-based Lopez Research, told MarketWatch the chip industry is facing “a perfect storm” of demand and supply issues that is unlikely to resolve soon.

“Unless we have a major economic meltdown, which is obviously possible, one of the things that’s happening right now is that almost anything you buy is going to have a chip in it,” Lopez said.

Reuters reported that chip prices could increase by up to 6 percent this year, but the delay has also seen production cut short. Carmaker Ford said it could see production cut by 20 percent as a result of the shortage of supply. Last week, US President Joe Biden announced $37 billion in funding to address the situation.

“The importance of semiconductors cannot be ignored due to their massive need in the Internet of Things, computers, smartphones, and consumer electronics devices. However, the global semiconductor scarcity and its unprecedented demand amid the pandemic have aggravated the situation for a wide array of industries. It has forced automotive, defense, industrial and other manufacturers to cut production and even shut down assembly lines,” Dr. Muhammad Khurram Khan, professor of cybersecurity at King Saud University and founder and CEO of the Global Foundation for Cyber Studies and Research in Washington, told Arab News.

He added: “If the current situation persists for the next few months, there are higher chances that the Kingdom may also observe a price hike for electronic items. So, it is better for local importers, businesses, and consumers to plan accordingly.”

The professor said that the current global supply shortage could be the catalyst for Saudi Arabia to invest more in this sector and develop its local capabilities.

“This would reduce dependence on imports, meet the local manufacturing demands, boost the economy, and create job opportunities in the Kingdom as per Saudi Vision 2030,” he added.

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