A shortage of semiconductors is a continuing and major issue. The squeezed market is forcing manufacturers to slow down, weighing on recovery. And ongoing strong demand keeps the pressure on. A ramp-up of capital investment to boost production capacity helps, but it’s going to take time before demand and supply are structurally in sync again.

Demand and supply shocks squeeze chip markets

Computer chips are in short supply due to a sudden spike in demand linked to Covid-19. This demand shock is primarily caused by consumers who can’t splash the cash on services such as restaurants and travel and who are now spending more on consumer electronics. The strong demand for home office equipment and faster than expected recovery from other sectors are also not helping.

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