Daily Brief: Microchips Are Still In Short Supply And Probably Will Be For A While Yet

Daily Brief: Microchips Are Still In Short Supply And Probably Will Be For A While Yet

almost 3 years ago3 mins

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Taiwanese electronics assembler and major Apple supplier Foxconn posted earnings on Tuesday that missed analysts’ expectations – and warned that ongoing microchip shortages could hurt its future orders.

What does this mean?

Strong demand for Foxconn-built iPhones and home-working equipment drove last quarter’s revenue higher, but international currency swings ate into the company’s profit. As the value of the Taiwanese dollar increased relative to the American, Foxconn’s local costs increased, while the worth of its overseas sales was eroded.

But naturally forward-looking investors were more bothered by Foxconn’s unexpectedly dire predictions for the future. The company warned that the global shortage of microchips could potentially leave it unable to fulfil up to 10% of its orders this year.

Patiently Waiting
Source: Bloomberg

Why should I care?

For markets: Tech firms struggle when the chips are down.

Semiconductor shortages were previously thought to hit carmakers hardest: they reportedly pay less for chips than technology companies and are therefore last in line. But as the world’s largest electronics assembler, Foxconn should know when tech firms are also set to miss out. That may help explain why Apple’s share price initially fell 2% on Tuesday.

Apple stock
Source: Google Finance

Zooming out: My other car is a Foxconn.

Taiwan’s largest firm recently announced plans to help other companies build electric vehicles (EVs) too. It’s a fast-growing market, but Foxconn may have its eye on Apple in particular. The Californian company is planning to launch its own smart cars soon, and may well need assistance with production and assembly. Foxconn has already entered partnerships with carmakers including Geely, and investment bank Morgan Stanley reckons more tie-ups are in the pipeline: it estimates Foxconn’s EV shipments could make up 10% of the global total by 2025.

Keep reading for our next story...

London Apartment Prices Are Finally Recovering

London prices image

Data out on Tuesday showed London apartment prices are finally beginning to turn a corner and recover from pandemic-induced declines, suggesting big city life may not be dead just yet.

What does this mean?

The average London apartment cost 10% less last October than it did in December 2019. But vaccine rollouts now appear to be making city living more attractive again: sale prices were 1.2% higher than that last month. What’s more, recent research suggests that an expected exodus of office workers from the UK’s capital has failed to materialize despite the home-working hegemony. That should signal good news for the future of major metropolises everywhere.

City Break

Why should I care?

For markets: Investors heart cities.

Swiss bank Julius Baer has been saying all along that cities will continue to be the growth engines of global economies – and of investors’ portfolios too. Forthcoming swaths of government stimulus spending are likely to be lavished on city-centric infrastructure such as roads, railways, and bridges. Urban digital infrastructure could get a boost as well, with 5G-fueled data collection making city management more efficient. And buildings themselves should get smarter as equipment monitoring improves maintenance. Public companies carrying out all this work stand to benefit.

The bigger picture: Global housing markets are still running hot.

While London apartment prices have only just begun to bounce back, many other housing markets have been on fire throughout the pandemic. Governments are now worried that unprecedented economic aid packages and ultra-low mortgage rates are pushing property prices artificially high, setting them up for a sharp correction. And when home prices fall, people could well cut back on spending – damaging economic growth. While some countries are taking action by tightening lending standards, others are hoping things will gradually calm down of their own accord once interest rates rise and upgrades to larger suburban homes are mostly completed.

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