China-Taiwan row to worsen global computer chip shortage

Samsung Electronics is set to launch a new range of devices. [File, Standard]

The ongoing semiconductor chip shortage is set to hit manufacturers worldwide harder as tensions between China and Taiwan flare up.

US House of Representatives Speaker Nancy Pelosi’s recent visit to Taiwan during which she rooted for the independence of the semiautonomous region from China has reignited tensions between Taipei and Beijing, with the latter launching military drills around the island.

Taiwan Semiconductor Manufacturing Corporation is the world’s largest chip manufacturer. 

Analysts fear the rising tensions could result in “economic coercion” from China, dealing manufacturers a fresh blow at a time they had started to recover from the effects of Covid-19 that affected supply of crucial components of many gadgets, from mobile phones to computers and cars.

Head of the Consumer Electronics Division at Samsung Electronics East Africa Samuel Odhiambo says the electronics manufacturer rode the shortage wave well because it was able to stock up at the onset of the Covid-19 pandemic. 

“The global chip shortage changed everything in the business and really disrupted manufacturing,” he said in an interview with The Standard.

“In 2020 our supply chain process was not affected as much; immediately the shortage was announced, it meant we had to plan to have more imports in order to ensure that we do not experience acute market shortages.”

Mr Odhiambo, however, reckoned a fresh round of shortages could see businesses suffer.

On the Kenyan market, he said like companies in other sectors, Samsung saw a decline in sales as the General Election drew closer.

Head of the Consumer Electronics Division at Samsung Electronics East Africa Samuel Odhiambo. [Peter Theuri, Standard]

Cut spending

This is as customers cut spending on non-essential goods and services. 

“Any time around elections, we see a decline in sales because people have generally cut down on spending. We hope the elections will be peaceful and the market returns to normal,” said Mr Odhiambo.

Samsung, South Korea’s tech behemoth, posted its highest revenue last year on solid global demand for semiconductors.

Consolidated revenue gained 18.1 per cent over the year to reach a new high of 279.6 trillion won (Sh25.4 trillion) in 2021.

The company’s earnings were boosted by strong demand for server memory chips and higher profit margins in its chip contract manufacturing business.

“Samsung is well placed to profit from the record-breaking demand for PCs and electronics,” technology analyst Sam Reynolds told the BBC.

He also said the firm had benefited from currency fluctuations: “The Korean won continues to depreciate, making Korea’s exports more attractive on the global market.”

The company has recently launched high-end gadgets such as The Samsung 8k Neo QLED TV 85 inch, which over Sh1 million.

Mr Odhiambo says these products are mainly bought by corporates for use in boardrooms, entertainment facilities, and wealthy individuals.

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