There are two scenarios that give me pause right now. Both are related to the production of high tech gadgets as well as mission critical tools like cameras. One is a world wide shortage of many different kinds of micro processors, micro controllers and various other families of semi-conductors. Ford and GM have both announced slowdowns in production of new vehicles because they are unable to source the semiconductor parts they need to complete vehicles. It's only a matter of time before the same shortages hit Tesla, Dell and Apple. I presume the short supply is already affecting high end camera production which is largely about assembling silicon parts together with a lens mount.
It's easy to predict that we'll start having back-order issues in short order. It may be one of the reasons behind the two month backlog of Leica Q2 cameras. It may already be the primary reason camera makers like Panasonic have fallen behind on lenses already announced on their product roadmaps.
But a bigger concern in the long run is the increasing aggression of the mainland Chinese government against Taiwan. The Chinese military have stepped up all manner of harassment against the tiny island nation in their quest to assimilate it back into communist control and ownership. But some of the biggest and most advanced makers of semiconductor components are located on Taiwan. Should open hostilities break out companies like Apple, and other computer makers, and car and truck makers, will run out of supply for parts for new laptops, iPads and, eventually, phones. Not to mention Ford F150 trucks; which would cause widespread panic in Texas.
Any disruption measured in time longer than days will roil the markets for just about all the fun toys we love. From cars to TVs, to our beloved cameras and lenses.
I'm not sure how firmly this is showing up on most people's radar but in the case of a company like Apple a month long glitch in critical supply would cause panic in the stock market which might retard any economic recovery and cause a net loss of hundreds of billions of dollars of investor capital. And a lot of jobs.
The current shortage seems to have stemmed from the quick shut down of demand for the first six to eight months of the pandemic. Ramping up for increased production is complicated and takes time.
But a shooting war between China and Taiwan would result in a disruptions the likes of which we haven't seen in a long time. And the fall out will include a lot more than delivery times lines for cameras and lenses.
Just something to think about. As if we don't have enough to worry about....
Am I missing something? Do you have additional (factual) information that might make me less anxious about the whole situation? Share it please.
17 comments:
Taiwan and Chine have been split for well over half a century. I doubt they'll start lobbing the missles now (hopefully). I never understood the Chinese inability to face reality in that situation.
Most have heard of the chip problem with Ford and GM and the work stoppages because of this. Not much out of the camera companies so far. Apple will never admit to being caught short handed of anything. That's not their style. I think Tim Cook is the best person on the entire planet at managing complex supply chains. I hope he saw this coming and planned accordingly as my retired is heavily dependent on Tim's being able to see this in advance.
In the end this won't hurt most businesses much. The automakers will finally be able to sell trucks, SUVs and the occasional car without big incentives so this will make up for lower volume in the near term. Apple never discounts anything so if they run into a serious supply problem it will hurt their bottom line, but I have faith in Tim.
I'm guessing from reading the blog that the VSL has decent supply of cameras and lenses to last thru the shortage. If not I'm sure the blog readers could pitch in. I'm going to look for my old Canon QL17 just in case things get desperate. I might even have some old film in the fridge I could send along with it.
Am guessing that posturing by the PRC against ROC is calculated as a show of strength to appease certain elements within the PRC itself, and that it's in no one's best interests for them to actually follow through.
Even in the best of times, availability of Leica products can be spotty, and I suspect production is much smaller in scale today than it was in the 1990s.
Jeff in Colorado
China is feeling their oats these days and have become increasingly pushy. To the point of being bullies. It's my opinion that a lot of this is to gauge Biden's and the EU's metal. Taking their temperature so to speak.
The unfortunate thing is the culture in China is such that if any weakness is shown the aggressor, China in this instance, must follow through. Currently China has the US on their heals. I hope strong and decisive leadership from the Whitehouse will neutralize China's current posturing. It seems China and Russia are working together on creating multiple fronts. It will be an interesting 2021.
As far as chips are concerned South Korea has come a long way building the necessary plant for those companies wishing to divest their manufacturing from China. Viet-Nam is also a major player but I am not sure how independent they are from Chinese pressure.
Interestingly China is now looking at the US as a source of cheap labour. If their plans come to fruition.
Eric
Haven't been able to get a Nikon Z7 since signing up for one at B&H in January (body only.) Don't know if it's related to the chip shortage, or possibly to Nikon's move to Thailand.
Maybe China could conquer Taiwan militarily, but it would be a hell of a project. D-Day in Europe covered about the same amount of water, with sixty-odd separate convoys and hundreds of ships. With all kinds of satellite intelligence now, there'd be no surprise. The biggest question would be, would Taiwan give up if faced with heavy intimidation? Or would it resist?
I’m not worried, but our companies really should stop relying on cheap labor to produce what we can make here with robots and unionized labor. I’m glad China is standing up for itself. We’ve been the world bully since the 1950’s. They made us look like idiots in Anchorage recently, but that’s because we were idiots.
This is something that's clearly a huge issue. Taiwan chip factories at risk. The lords of our military-industrial complex are certainly aware of it.
Just one company, TSMC, is a huge issue, fabbing Apple and AMD chips and others on very advanced fabs. I'm seeing stories about Intel (and even IBM) getting back their game, with the US government mid-wifing. It reminds me of the things that went on in the 1990s when Japan was the challenger, things like SEMATECH. That worked out OK for the US last time around.
You have to wonder what contingencies the Taiwanese manufacturers have in place. I live in L.A, and when the Brits handed Hong Kong over there was a tidal wave of immigration and riches that flooded out of there to here - Much to America's benefit.
It's an interesting time to be alive, as always.
It is a very complex picture, but companies who manage their supply chains very well. like Toyota and Apple are OK; Honda and Nissan,though, for example, have been hit by the shortage of ICs, much of it from pandemic related slowdown last year.
In the consumer market, the onslaught of bot scalpers has made it very difficult to get hold of the Playstation 5, X Box X, high end graphic cards, indeed almost any graphic cards. That is because of the shortage of ICs and greedy scalpers, plus, of course for graphic cards, the digital currency miners.
>>The Chinese military have stepped up all manner of harassment against the tiny island nation in their quest to assimilate it back into communist control and ownership.<<
China has not been communist for quite sometime now.
It is a complex situation. TSMC recently announced it is expanding its plans for a new chip manufacturing plant in Arizona and Intel has announced that it will start fabing chips designed by 3rd parties but if the scenario you paint of aggressive Chinese actions against Taiwan comes to pass there will indeed be a massive chip shortage that, as you say, will cause chaos in all sorts of markets. On the other hand China will also be heavily affected by this economic chaos with its factories suffering massive loss of orders leading to massive unemployment in China. Apple alone supports of 4 million jobs in China and most of the tech industry outside of South Korea rely on China. The one thing that that the CCP has to be very careful about is breaking its promise to the Chinese people of economic growth and security which is what would result from the scenario you paint. What the CCP is most afraid of is massive discontent in its population leading to political unrest. We often see China as monolithic politically but that is inaccurate. My guess is the CCP is likely playing a long game with Taiwan.
To those who would look to the status quo of the past I would suggest that the playing field, militarily, has shifted dramatically. Hypersonic Carrier killing missiles. 4.5 Generation attack aircraft with some stealth capability. Massive forward logistics proliferation inlcuding the creation of actual islands with one mile airstrips. Cruise missile capability. Increased submarine inventory. And a shift in strategy. That's how the Chinese equation is different now than before.
Also, the west's non-capability in dealing with the changes in Hong Kong presage a different understanding of the balance of power.
Add in support from Russia via saber rattling in other spheres, dividing our resources and focus and you have a pretty compelling scenario for a hostile take-over with very limited violence.
Would we put an entire carrier group within a 20 minutes response from the world's largest air force? I would not.
Taiwan is looking more precarious to me than it does to those relying on past capabilities of the players....
My guess is that CCP will play a shorter game predicated on calling our bluff. Stock up on micro chips if your business depends on it. It takes months or years to spin up a new wafer fab; and that's in the best of times.
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The other big center for chip production is South Korea, which has its own concerns about military action from over the line. I'm glad that Intel has decided to ignore the demands of the hedge funders (to outsource all their production to Taiwan in order to increase shareholder value) and instead build a couple of new fabrication plants in Arizona.
By the way, Ford has "paused" F150 production for two weeks due to the chip shortage. Expect rioting to break out in Texas.
Still have my 1976 Ford F150 that I bought on my 25th birthday, still runs and looks great. Still own and drive my 1977 Mercedes-Benz diesel, it runs great and only has 3¶5830 miles on it. It can run off cooking oil. Still have my film cameras to use for the big shoot out that's coming. Me, my truck (that can run off MoonShine I use to live in Arkansas on the border with Texas for 3 years) my cooking oil MB and a film camera, I'm off to the races!!! GOD, I love the good old days!!! Who needs the new stuff? You can't see the difference anyway, or can you?
Be safe and enjoy
PRC's got bigger problems that annexing Taiwan won't fix:
https://www.theguardian.com/inequality/2017/sep/28/my-parents-say-hurry-up-and-find-a-girl-chinas-millions-of-lonely-leftover-men
Jeff in Colorado
yes, there are major shortages of IC's, but any manufacturer with any sense will have bought at least a years supply in advance, I just got an email from my supplier about an order I made when they were supposedly in stock a few months ago, they weren't, now they're saying they'll have some in 2026.
Adam, As I am a supplier with over 30 years of experience working with major producers of semiconductors and multi-national users of semiconductors I think you don't really understand corporate logistics, procurement and product evolution. Most users (all?) work with "just in time" delivery strategies to ensure that they don't hold aging inventory since products change frequently and demand is never certain. Also, with tight supply there is no way in the world that suppliers would be able to supply a year's worth of finished, advanced components to a worldwide manufacturer such as Apple all at once. No supply chain is instantly scalable and no company (on either side) would want to commit to such enormous future deliveries.
The very reason why we have a shortage now is that semiconductor makers were humming along, producing enough product week by week until the pandemic stepped in and auto makers, etc. radically cut orders based on the precipitous drop in demand. Ramping production and inventories back up is not as easy as flipping a switch.
Healthy and productive businesses run on a long order basis but a short delivery basis. This usually allows fabs to "right size" production instead of trying to produce large swings in manufacturing. Also, there is a finite supply of expertise and a finite supply of the machinery necessary to produce the products in fabs. These humans and materials can't be interchanged or added at the drop of a hat.
Sure, if you are making a singular product and are a small company where the product doesn't cycle through development evolution on a yearly or set--annual basis, and your produce has a static demand profile I'm guessing you might be able to source a year's supply but what you are proposing, industries wide, is like asking every individual family to store a year's supply of water at a time... And to pay for it long before it is used.
I'm not sure where or how I'd store 200,000 or 300,000 gallons of fresh drinking water... you know....just in case.
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