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COVID-19 outbreaks in Asia impacting shipping, chip supply chain

Brady Wang, Counterpoint Research Associate Director, joins Yahoo Finance Live to discuss the disruption in global shipping and the chip supply chain amid COVID-19 outbreaks in Asia.

Video transcript


ALEXIS CHRISTOFOUROS: A fresh wave of COVID-19 outbreaks in Asia is creating new bottlenecks in the global supply chain. It's threatening to push up prices. And it's also weighing on the post-pandemic recovery.

Here to talk about it now is Brady Wang. He is associate director at Counterpoint Research. Brady, thanks so much for being with us. Let's talk about what this is impacting right now, these new cases that we're seeing in Asia. I want to start with the global computer chip shortage that we're having. Is this just exacerbating things there?

BRADY WANG: Yeah. I've seen the new wave of COVID-19 clusters infection in Taiwan has created an alarm to the global semiconductor supply chains, including the computing chips. I think Taiwan has managed to contain the virus for more than one year. Therefore, we may see a shortage. But we never saw the disruptions.

KRISTIN MYERS: So Brady, curious to know how long these disruptions might last. Do you see them waning or getting better? Or might they possibly even get worse going forward?

BRADY WANG: I believe for the supply and demand balance now is getting better. But the balance is still very fractious. As I said before, the accumulated cases since the COVID-19 outbreak in Taiwan in 2020 this was only around 1,000. However, since the end of April, when the variant made its way through the national airline pilot, Taiwan has recorded more than 11,000 new cases within a few weeks. This is with, of course, the other problems for the chips supply.

ALEXIS CHRISTOFOUROS: Mm-hmm. Is a big reason because there are such low vaccination rates across Asia? And what is that doing not only to manufacturing but also to consumer spending and demand for these products right there within Asia?

BRADY WANG: Yes, I think the vaccination rate in Taiwan remains low. I think overall, it's around 3% of Taiwanese people so far has received the first dose. I mean, [INAUDIBLE] the emergencies. We got the best thing from Japan and the United States. However, this is still far enough to maintain this vaccination rate here.

KRISTIN MYERS: So supply chains take notoriously long to fix or to shore up in some way. I'm curious to know if, right now, what we are seeing, is this a matter of we just have to grit our teeth and bear it? Or is there something that can be done to shore up some of these supply chains?

BRADY WANG: Yeah. So we manage-- I mean, we need to make sure the supply is reliable now, right? And now, we believe there is currently in Taiwan-- I mean, the supply chains are on the upswing, like the foundries, like [INAUDIBLE] is still OK. However, we need to make sure the supply is good enough because of the boosted demand from the economy recovery, right?

ALEXIS CHRISTOFOUROS: Are there certain products that are having a better time of it when it comes to the supply chain, that it is easier to get certain products versus, say, those computer chips, which have been so difficult to find, even early on in the pandemic?

BRADY WANG: Early the pandemic, I think 2020 this pandemic outbreak, we start to see the computing chip in shortage because of the demand for working from home and because of the demand of migrating from 4G to 5G. Then we start to see the chip shortage. And also the shortage spread to the others like the auto chips. But now it looks like it's getting the supply and demand balance is getting better.

KRISTIN MYERS: Curious to know where you see pricing going. We've been talking a lot about how we've been seeing prices on consumer goods but just also the inflation that we've seen across the board in a variety of industries. Where do you see pricing going from some of these outbreaks? And do you think some of these pricing moves, at least to the upside, are temporary?

BRADY WANG: Of course, the pricing is continuously increasing. But now it's not a problem about pricing. It's a problem of if you can get the component chip. And all the lead times, for example, for the auto or for the computer chips, has extended to half-year or even more than half-years in the past few quarters, right? So now, of course, the price of a component is increasing. But the problem is that if you can get that component.

ALEXIS CHRISTOFOUROS: All right, Brady Wang of Counterpoint Research, thanks so much for joining us today.