Car Chip Brokers Make Supply Issue Worse

Jul 25, 2022 2 min read
Car Chip Brokers Make Supply Issue Worse

Never let a good tragedy go to waste…

Recently, Reuters ran a fascinating article about a man in Singapore who purchased an allotment of automotive chips from Germany and is looking to score big by marking them way up. The original buyer only paid $23.80 for each chip, a reasonable price. However, this guy is looking to sell them to auto suppliers for a whopping $375 each. And while the chips he has stored safely away would fit in the backseat of a car, at that price he would get $23 million for the lot.

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This kind of profiteering off the car chip shortage helps to highlight part of the problem. While consumers suffer through few vehicles on dealer lots and long wait lists, others are sitting on chip supplies to shake down automotive companies for more money.

And while this particular gentleman is targeting Chinese auto suppliers, his tactics absolutely will affect markets in North America, Europe, and elsewhere. Before, chips were something a business would have to sell a lot of to make a little profit. Now, thanks to scarcity, people can afford to sit on their supplies, forcing the scarcity issue so it becomes more severe, then cash in for big money.

This is why automakers have started to shift how they acquire chips. Instead of dealing with middlemen, more car companies are looking to establish direct sales agreements with chipmakers. The hope is they will be able to get more microprocessors while the manufacturers pocket more profit in return. Hopefully, these kinds of arrangements result in the resolution of the shortages, something which can’t happen soon enough.

If you think the chip situation is bad here in North America, the Reuters report indicates things are much worse in China. Stringent government lockdowns, combined with the Chinese market being depending on chips imported from other countries that include the US and Taiwan has strained the industry.

While some chips are manufactured in the Middle Kingdom, domestic plants are inexperienced and so can’t provide the necessary volume, a reality which might last for years to come. With China’s big push toward electrification, which requires far more chips per vehicle, that’s a huge problem.

In other words, no matter how bad you have it, there’s always someone worse off. That’s not to say we shouldn’t strive to improve our situation, but the problem could be far more severe.

Source: Reuters

Photos via Intel

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