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Samsung Warns Of 'Serious Imbalance' Amid Global Chip Market Shortage

An unprecedented shortage in global semiconductors is impacting everything from smartphones to electric cars amid a "serious imbalance" in the $650 billion market.

Samsung Electronics warned Wednesday that the global shortage in semiconductor supplies has created a "serious imbalance" that is affecting production in everything from smartphones to electric vehicles.

Chip demand surged last year amid the work-from-home shift triggered by the global coronavirus pandemic, lifting worldwide sales by 6.3% to just under $640 billion. That demand looks set to continue well into this year and next, as well, as economies move out from the pandemic's grip and government's stoke investment in green technologies. 

The pandemic's impact in semiconductor production, however has meant the industry is unable to keep pace with neither current nor forecast demand, creating a marked shortage in new supplies that has slowed investment plans for carmakers such as Volkswagen  (VWAGY) - Get Free Report, General Motors  (GM) - Get Free Report and Ford  (F) - Get Free Report and game console makers such as Sony Corp.

"If you are an experienced player, you will remember that in 1999 there was a similar crisis in this industry, but it was way smaller," said Semiconductor Manufacturing International Corp Zhou Zixue during an industry event in China Wednesday. 

"We have to deepen our cooperation, we have to give more attention to innovation," he added. "Only by doing that our industry can control the challenges facing us."

Volkswagen CEO Herbert Diess warned yesterday that the automotive industry will "have to react due to the significance of semiconductors with regard to vehicles today", telling shareholders in the world's second-largest carmaker that he doesn't expect the shortfall to be corrected until next year.

Samsung's co-CEO, Koh Dong-jin, told his company's AGM that the "serious imbalance" he's seeing hasn't been resolved. 

Ford also noted yesterday that if the shortage extends through the first half of the year, it could take a hit of between $1 billion to $2.5 billion to its adjusted bottom line, GM issued a similar caution earlier this month.

The U.S.-listed shares of Taiwan Semiconductor  (TSM) - Get Free Report, the world's biggest chip manufacturer, were marked 1.2% lower in pre-market trading Wednesday, extending their one-month decline to around 13.5%

Samsung Electronics, the world's biggest chipmaker for smartphones, fell 0.6% in Seoul and are down nearly 10% from their January 11 peak.