THAI manufacturers have been further hit with a double whammy as a severe shortage of microchips has thrown this market into turmoil while prices of all types of steel products are initially rising by 10-15 percent this month, Naewna newspaper said this morning (April 6).
Mr. Nawa Chantanasurakorn, vice president of the Federation of Thai Industries (FTI) and honorary chairman of the Steel Industry Group, said since steel is not an upstream industry with there being limited domestic iron ore supply, production requires importing scrap metal from abroad for smelting and shaping. The end product is reinforced steel bars, wire rods, steel sheets, structural steel, and other types of steel used in both construction and automotive industries.
For special grade steel, the first impact is higher import cost due to rising energy prices.
“We have been hit by four blows. The first is increased transport costs. The second is the rising energy prices, which consequently increases transport costs.”
“But we still need oil for the steel production process. Even though most steel mills use fuel oil, which isn’t as expensive as diesel, it’s still likely to increase. The third blow is the increasingly high shipping costs. And the fourth and final blow is the rising electricity prices,” Nawa said.
This situation requires two price adjustments with the first, an increase of 10-15 percent this month, and there to be a review of the price structure next month to determine whether to hold back the second price hike, depending on the future situation, he said.
However factory workers are unlikely to be laid off as yet because several government projects are underway with this holding up domestic demand.
Meanwhile Mr. Suphan Mongkolsuthee, chairman of Synnex (Thailand) Plc, said there is currently a severe shortage of microchips, a crucial component in the electronics industry, due to increased use of artificial intelligence (AI).
While these chips were previously primarily used in electronic devices such as mobile phones, tablets, and computers, they are now being placed in vacuum cleaners, cameras, and all kinds of electrical appliances.
“I admit that chips are really scarce in the market right now. There’s a huge shortage because AI has taken them all. We know the AI market is growing very rapidly. Everyone is using them as processing tools; they consume all the power. Data centres also need AI.
“So when AI businesses become profitable, they are willing to buy expensive chips that we can’t compete with. We’ll probably have to let the AI market take our chips for now,” Supan said.
Normally, chips are upgraded constantly without price increases, but now manufacturers immediately hike prices after upgrades. This is likely due to the massive increase in market demand.
He noted that everything is becoming expensive, and while this is not a challenge, it is a significant and exhausting situation. Although the Middle East conflict is a factor for the shortage, the fact is that the world has changed drastically with this making it difficult for large players to adapt quickly while smaller players are practically doomed.
“The consequence of costly chips is that laptops will become more expensive, while people’s incomes remain the same. This will lead to people buying outdated models at higher prices and using mobile phones for longer duration.
“However the automotive industry, which also uses chips as a key component, has not yet been affected according to discussions with the sector. This is because it has high profit margins giving it the purchasing power to buy chips at higher prices,” Supan said.
CAPTION:
Printed circuit boards (PCBs) for electronic devices. Above image Bermix Studio on Unsplash, Front Page – Naewna
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