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2021 Promo QP 115 H2 ECONOMICS – PROMOTIONAL EXAM 2021 QP Case Study Question: Developments in the global semiconductor industry Extract 1: The smallest things leave the biggest impact Semiconductors, also known as microchips and integrated circuits, are essential components in every electronics product, whether it be a simple remote control unit for changing channels on the television, or car electronics systems like driver assistance and navigation. However, recent events have caused significant disrupti on to the industry an d excess demand in the market for semiconductors. The supply of microchips cannot be turned on and off with a switch. Multibillion -dollar fabrication plants are finely tuned and run 24/7, 365 days a year. Changing the production line for a new microchip can take weeks, if not months, and adding significant new fabrication capacity can take years and billions of dollars. When car sales bounced back faster than expected in the third quarter last year and carmakers tried to ramp up production again, microchip factories could not respond fast enough given the long lead times needed to schedule orders. Other industries, such as consumer electronics and home appliances, saw a spike in sales from the pandemic’s “stay at home” effect but suddenly found themselves unable to secure adequate supplies of microchips to meet the increased demand. A fire at a Renesas microchip fabrication plant in Japan, which accounts for 30 per cent of the global market for microchips used in cars, as well as disruptions to microchips plants following the severe winter in Texas, further compounded the excess demand. Taiwan also faced the worst drought in nearly 60 years, threatening chip-making production lines that consume large amounts of water. Source: Adapted from South China Morning Post, 12 May 2021 and Nikkei Asia, 28 April 2021 Extract 2: Growth in semiconductors exports for Singapore and South Korea As consumption slowly returns to life across the world with growing vaccination rates and government stimulus payments reaching buyers, impacts are being felt around the world. Analysts are predicting higher full -year exports for Singapore after a better -than-expected first quarter showing. Electronics shipments expanded 24.4 per cent from a year ago in March. Selena Ling from OCBC Bank noted that there was double -digit growth recorded in personal computers, electronic components and integrated circuits shipments. “This is a clear indication that Singapore’s semiconductor industry is benefiting from the ongoing global shortage,” she said. South Korea’s exports in April rose the most in ten years – total semiconductor shipments climbed 30.2 per cent, while automobiles exports jumped 73.4 per cent. Products such as computers, televisions and smartphones have been rising in demand along with semiconductors. Source: The Straits Times, 16 April 2021 and Bloomberg, 1 May 2021

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