“While I expect shortages to bottom out in the second half [of the year], it will take another one to two years before the industry is able to completely catch up with demand,” CEO Patrick Gelsinger told analysts on Thursday.
Ouch. That’s terrible news for carmakers, many of which have been forced to idle plants this year because they can’t get enough chips, limiting the supply of new vehicles at a time when used car prices are soaring.
Large pickups and SUVs are US automakers’ best-selling and most profitable vehicles. General Motors and other companies have tried to keep making them, shifting their supply of available chips away from less popular vehicles.
“These most recent scheduling adjustments are being driven by temporary parts shortages caused by semiconductor supply constraints from international markets experiencing Covid-19-related restrictions,” said General Motors. “We expect it to be a near-term issue.”
Not so fast: While General Motors’ supply troubles may ease in the coming weeks, the industry has to remain vigilant. Intel and other chipmakers are working to expand their production capacity, but it can take years for new plants to come online.
“The company assumes that the worldwide shortage of supply of semiconductor components will affect the business also in the second half of the year,” it warned investors. “The company also recognizes that the visibility how the supply situation will actually develop further is currently low.”
What’s next: Smartphones could be the next industry to get walloped, according to ING Greater China chief economist Iris Pang.
India gets its first unicorn IPO
India’s first billion-dollar tech startup to go public got off to a flying start on Friday, reports my CNN Business colleague Diksha Madhok.
“India is a tough market to operate in, but if you are building to succeed in India, you are already exceptional,” Zomato founder Deepinder Goyal wrote in a blog post Friday. “We are going to relentlessly focus on 10 years out and beyond, and are not going to alter our course for short term profits at the cost of long term success of the company.”
While Indian stock markets have been trading near all-time highs, Zomato’s listing was a big test of investor appetite for loss-making tech startups. Zomato reported revenue of 19.93 billion rupees ($266 million) for the year to March 31, 2021, and a loss of 8.16 billion rupees ($109 million).
The country has a ton of so-called unicorns — tech startups valued at more than $1 billion — but none of them had ever gone public in India or overseas before. Analysts had previously expressed concern that the startups — many of which have raised hundreds of millions of dollars from private investors at extremely high valuations — needed to start showing consistent profits.
“The tremendous response to our IPO gives us the confidence that the world is full of investors who appreciate the magnitude of investments we are making, and take a long term view of our business,” Goyal wrote.
Vaccines = economic recovery?
For the vaccinated, it’s tempting to think of the pandemic as under control.
But that’s not the case. In most of the world, the economic recovery still depends on getting more shots into more arms, and that’s not happening quickly enough. Meanwhile, the Delta variant continues to spread, including among the fully vaccinated.
See here: IHS Markit has downgraded its global growth forecast for 2021 by 0.2 percentage points to 5.8%.
“In 2021 and 2022, economic growth will be linked to COVID-19 vaccination progress. Countries with low vaccination rates face increased risks from the Delta variant of the virus, adding to the urgency of stepping up international vaccination campaigns,” said Sara Johnson, executive director of global economics at IHS Markit.
Warning, warning: July PMI data complied by IHS Markit showed Britain’s economic recovery slowed dramatically as the Delta variant caused a sharp spike in cases and forced huge numbers of workers to stay home. That’s despite one of the highest vaccination rates in the world.
“Those signalling a drop in output mostly commented on severe shortages of raw materials and the impact of COVID-19 isolation on staff availability,” IHS said in its report.
Coming next week: What does the Federal Reserve think about the threat posed by the Delta variant? The central bank gives its next policy update on Wednesday.