How a perfect storm of shortages and rental car chaos sent used-car prices skyrocketing

Cars sit outside a used car dealership with spray paint on the windows advertising the vehicles.
Used car and truck dealers have bought models for more than their original sticker price.

  • Used-car prices have skyrocketed over the last year.
  • A supply crunch in new cars is spurring demand for used models.
  • Prices may not return to normal for at least a year, one expert told Insider.
  • See more stories on Insider’s business page.

If you’re looking to get a sweet deal on a used car to take advantage of the warm summer weather, it’s not going to happen.

The market for secondhand cars is absurdly and unprecedentedly hot right now. Used vehicles went for a whopping 40% more in June than they did before the pandemic in February of 2020, according to data from JPMorgan.

The average nine-year-old car changed hands for $13,250 in June, according to automotive research site Edmunds. That’s a 30% hike over the same month in 2020, while a five-year-old vehicle will run you a staggering $24,000 – up more than $6,000 from a year ago.

The insanity all comes down to simple economics: demand for used cars far outweighs their supply, pushing prices higher and higher. But the reasons for scant inventories and such high interest in used cars get a bit more complicated.

Why are used cars so expensive right now?

The market for used cars is deeply intertwined with the market for new ones, says Kayla Reynolds, an analyst at Cox Automotive. The latter is going through a rough patch, and those troubles are trickling down into the used market.

A devastating shortage of microchips – which are necessary for all manner of critical electrical components – is slowing car production worldwide, choking the supply of new models and driving their prices skyward. High dealer markups and a lack of options are forcing more buyers to shop secondhand, chipping away at used-car inventories, Reynolds said.

To put the magnitude of this shortage into perspective, new-car inventory in the US was down 54% in June as compared to the same month in 2019, according to Cox. Dealer incentives have plummeted and transaction prices for new cars have hit all-time highs as a result.

That’s bringing a whole new set of customers to the used market, people who were prepared to spend serious money on a brand-new set of wheels and are, in turn, driving up used-car prices, says Ivan Drury, senior manager of insights at Edmunds.

Read more: Meet 9 former Tesla execs who left Elon Musk to become power players at rivals like Apple and Rivian

A drop in new cars rolling off assembly lines has upended the flow of vehicles to and from rental agencies, which are typically a major source of used inventory. Rental companies, which sold off cars en masse during the pandemic, usually buy some 2 million new cars every year and turn them over every 1-2 years, Drury said.

With travel surging back, they’ve resorted to snatching up used cars – and they’re not giving them up.

Moreover, with new-car prices through the roof, people are holding onto their aging vehicles longer instead of trading them in, cutting off the flow of cars onto the used market. For the same reason, they’re opting to buy their leased vehicles at the end of the term, rather than swap them in for a new lease.

When will the madness end?

There is good news. Prices seem to have peaked in May and are heading back to Earth.

Between May and June, wholesale car prices declined for the first time since December, suggesting that demand and supply are on a path toward some kind of equilibrium, Cox’s Reynolds said.

She expects that retail prices will soon follow, and that shoppers will start to notice prices on car lots gradually dropping by the fall. The pandemic-induced car-buying frenzy tapering off partially explains the shift, she said.

But the supply crunch brought on by the chip shortage isn’t going away anytime soon, meaning it could be quite a while before shoppers see used-car prices they’re accustomed to. Even once new models are back in stock, the secondhand market won’t snap back to normal overnight, Drury said.

His advice to car buyers: “I’d say give it at least six months. And in all honesty, if you can hold off for an entire year, you’re better off with that.”

Are you a car dealer, buyer, or private seller with a story to share about what it’s like to buy and sell cars in this red-hot market? Contact this reporter at tlevin@insider.com

Read the original article on Business Insider

The UK economy grew just 0.8% in May as manufacturing troubles caused the rebound to lose steam

Nissan car factory UK
UK car production plunged in May, official data showed.

The UK economy undershot expectations to grow 0.8% in May, as bottlenecks in the manufacturing sector offset rapid growth in the hospitality industry, official data showed on Friday.

That month-on-month growth in gross domestic product was well below the 1.7% uptick economists had been expecting. It compares with a 2% rise in April, revised down Friday from 2.3%. Overall, UK GDP was 3.1% smaller than before the pandemic in February 2020.

The manufacturing sector badly underperformed in May, contracting 0.1%, the UK’s Office for National Statistics said. Analysts were expecting strong growth in the sector.

Transport equipment manufacturing suffered the most, falling 16.5% in May compared with April as global microchip shortages disrupted car production. The decline is a clear indication of the impact that supply-chain bottlenecks are having on economies.

However, growth of 0.9% in the services sector helped the UK economy expand overall. Accommodation and food service activities were up 37.1%, as restaurants and pubs welcomed customers back indoors after the government eased COVID restrictions further.

Read more: The chip shortage has left US car buyers scouring empty dealerships. That won’t change anytime soon.

The pound was down 0.05% after the data was released, at $1.377. The UK’s FTSE 100 was up 0.54% after a sharp fall on Thursday.

The UK government has had to delay the final stage of unlocking pandemic restriction, as a result of a sharp rise in coronavirus cases driven by the delta variant. But it is set to end almost all restrictions on July 19, in the hope that vaccinations will keep hospitalizations low.

“It’s great to see people back out and about thanks to the success of the vaccine rollout, and to see that reflected in today’s figures for economic growth,” said UK Chancellor Rishi Sunak. He added that the government was keeping up its support through the furlough wage-subsidy scheme.

Samuel Tombs, chief UK economist at consultancy Pantheon Macroeconomics, said: “May’s weaker-than-expected increase in GDP underlines that the recovery to its pre-COVID levels will be drawn out.”

He added: “Growth in GDP likely will slow further over the summer… This probably partly reflects the fading of some initial enthusiasm when businesses reopened. Rising COVID-19 infections also appear to be prompting some people to work from home again and to visit shops and services venues less frequently.”

Read the original article on Business Insider

With prices of used vehicles soaring, now is the best time to sell your car – if you have one you don’t need

first car shopping
  • Prices for used cars and trucks increased 10% in April and 7.3% in May.
  • “If you have a car to sell, there’s never been a better time,” the CEO a car-shopping service said.
  • Getting multiple offers could be worth thousands of dollars on the sale or trade of your old vehicle.
  • See more stories on Insider’s business page.

The used-vehicle market is unusually hot this summer.

Prices for used car and trucks increased 10% in April and 7.3% in May, the highest of any consumer spending category included in the government’s measure of inflation, and some models are going for higher prices now than they sold for new a year ago.

Like the housing market, a lack of supply and a lot of demand is causing prices to soar to new records. Average used-vehicle prices topped $22,500 at the start of May, and are showing no signs of coming down any time soon.

“If you have a car to sell, there’s never been a better time,” said Pat Ryan, the CEO of CoPilot, a personalized car-shopping service. “Dealers will pay incredible prices.”

Of course, there are a few caveats to consider before rushing off to find a buyer, namely whether you need to replace the car, or if you’re trading it in for a new one.

Toby Russell, a co-CEO of the used-vehicle marketplace Shift, told Forbes earlier this month that his company was paying 25% more for vehicles than it did at the start of the year.

“Normally we would lose a little money on that, but we’re making money on these because auction pricing is so intense and high,” he said. “It’s just a total dislocation in the market caused by a surge in demand and lack of supply coming from new cars.”

Ordinarily a year-old trade-in would lose as much as a quarter of its value, but some in-demand trucks and SUVs are being traded back to dealers for more than last-year’s purchase price, a CNN analysis of Edmunds.com data found.

A year-old Dodge Ram 2500 is now worth about $5,200 more than it cost new last year, while a Ford F-250 is worth $3,300 more, CNN found. Other popular models, like Jeep Wranglers and Honda Civics, lost some value, but only a fraction of what normally gets carved off when you drive off the lot.

Most used inventory comes from off-lease models or former rentals, but the pandemic disrupted that flow and in some cases caused it to reverse. When the chip crisis cut the supply of new cars, automakers curbed their fleet sales, forcing rental companies to buy used cars instead.

Ryan said he doesn’t see an end in sight for the lack of supply, which is down roughly 90 percent from normal for price-points below $20,000 – an issue he speculates could be related to buyers using government stimulus money.

“It’s not clear where the supply comes from, because there’s no used car factory you can ramp up and start producing,” he said. “The market could be like this for quite a while.”

So, if you have a car to sell or trade-in, Ryan recommends contacting several dealers to get a few bids. It’s not quick or easy, but it could be highly rewarding.

“We regularly see people who went to go offer their car online, and then they called another dealer and found there were $4,000 or $5,000 differences that were people were offering,” he said.

If you’re considering a trade-in, Ryan suggested that you would get the most bang for your buck swapping an in-demand crossover SUV or pickup truck for a higher-end sedan or compact from a maker that has been less affected by the chip shortage.

“Dealers are thirsting for inventory, there’s no question about it,” he said.

Read the original article on Business Insider

The Fed’s favored inflation gauge is at its highest since 1992, but Goldman Sachs says this ‘one-off inflationary boost’ will soon flip to a ‘one-off disinflationary drag’

Goldman Sachs Logo
  • The core PCE price index, the Federal Reserve’s favorite measure of inflation, rose in May at its fastest since 1992.
  • Goldman Sachs analysts said this “one-off inflationary boost” will over time become a “one-off disinflationary drag” over time.
  • They predict that core PCE inflation will drop to 3% by the end of 2021, and slip further to 2% by December 2022.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

The Federal Reserve’s favored measure of inflation rose at its fastest pace since 1992 last month, driven primarily by price rises in products like cars, chips and furniture, but Goldman Sachs said this rise in inflation is temporary and will reverse itself over time.

The core Personal Consumption Expenditures price index, which strips out volatile food and energy prices, showed on Friday that personal spending had stagnated and inflation had picked up in May by 3.4% year-over-year.

Hold-ups in the supply chain – for goods such as semiconductors – and in global shipping have helped drive prices for consumer goods above pre-pandemic levels, Goldman Sachs analysts said in a research note Sunday.

On the demand side, coronavirus stimulus checks have pushed up buying of more expensive purchases, they noted. As a result, consumers are paying higher prices for new and used cars, consumer electronics, computer chips, furniture, appliances, and sports equipment.

“Prices in supply-constrained categories are likely to remain firm for at least a couple more months, but should eventually partially revert to pre-pandemic trends,” the analysts wrote. “This means that the current one-off inflationary boost will eventually become a one-off disinflationary drag.”

Goldman Sachs predicts that core PCE inflation will drop to 3% by the end of 2021, and slip further to 2% by December 2022, pulled lower by the falls in those product categories and as the boost from the reopening of the travel sector fades.

The Fed uses core PCE as its primary gauge of inflation, and it has signaled it will let inflation run above 2% for a time to allow the labor market to recover from the impact of the pandemic. It expects any jump in inflation during the recovery will be transitory, and a high rate of year-on-year price growth is seen as stemming from a comparison with levels in the early phases of the pandemic.

The supply and demand pressures will ease at different rates in the affected categories, the Goldman Sachs analysts said. Semiconductors should shake off their recent big price rises by the end of this year as the shortage improves, though the market is likely to stay under pressure until 2023, they forecast. Auto production could start to return to normal as early as the third quarter this year, as plants work through the summer shutdown, the analysts believe.

This return to normal will be brought on by a range of factors, such as growth in production capacity, better usage of current production resources, and an end to the global supply-chain snags.

“In short, the global goods sector is best thought of as facing a number of serious disruptions and challenges as the world economy recovers from the pandemic, not as having been pushed to its productive limits by the current level of demand,” the analysts said.

Read the original article on Business Insider

Some second-hand trucks now cost more than their original sticker price in a red-hot market – a 2-year-old Toyota Tacoma went for $1,000 more than its price when new

Cars sit outside a used car dealership with spray paint on the windows advertising the vehicles.
Used car and truck dealers have bought models for more than their original sticker price.

  • Used trucks have been sold for above their original sticker price in a red-hot market, Fox Business reported.
  • A supply crunch from factory closures and worldwide chip shortages for new vehicles have contributed to price rises.
  • But prices have climbed at a slower rate this week, according to vehicle data site Black Book.
  • See more stories on Insider’s business page.

Some car dealers have sold used trucks for more than the original sticker price thanks to rocketing demand and a global shortage of chips needed to make new cars, Fox Business reported.

Used vehicle prices have risen by an average of 30% over the past year, according to automotive data site Black Book, per Fox Business.

Alex Yurchenko, Black Book’s senior vice president of data science, told Fox Business that he had found 73 models of vehicles between one and three years old that were being sold to dealers at auctions for more than their original price.

“The market is very strange right now,” Yurchenko told Fox Business. “Dealers need the inventory, so they are paying lots of money for their vehicles on the wholesale market.”

A vehicle’s sticker price is the manufacturer’s recommended price for retailers.

While many of the models were high-value trucks and SUVs, such as the Ford F-150 Raptor pickup, Yurchenko told Fox Business that he found modestly priced vehicles sold above their sticker price, too. For example, Yurchenko found a 2019 Toyota Tacoma SR double cab pickup, originally priced at $29,000, going for nearly $1,000 more in 2021, Fox Business reported.

“Before we get through this, prices for many mainstream vehicles will get closer to their manufacturer’s suggested retail price,” Yurchenko told Fox Business.

The inflated prices are thanks to vehicle supply shortages caused by factory closures last year, a global shortage of automotive chips, and strong demand in the vehicle market, which is even leading to some sellers making a profit on cars with broken engines.

Used vehicle prices climbed 7.3% in May, and used vehicle price rises accounted for about one-third of overall inflation, according to data from the Bureau of Labor Statistics.

And used vehicle prices have also soared across the Atlantic – the UK’s Vehicle Remarketing Association (VRA) reported double-digit price increases over the past few months, and predicted that prices will rise further.

“We are in a kind of ‘perfect storm’ where stock is in very short supply, demand is high, and buyers are ready to spend freely,” VRA chair Philip Nothard said. Nothard said that dealers are also happy to sell older vehicles than they would’ve done previously.

The increase in used vehicle prices in the US has started to slow, with used cars climbing 0.75% last week – the lowest weekly rise in 17 weeks, Black Book told Fox Business.

Read the original article on Business Insider

With used vehicle prices soaring, now is the best time to sell your car – if you have one you don’t need

first car shopping
  • Used car and truck prices increased 10 percent in April and 7.3 percent in May.
  • “If you have a car to sell, there’s never been a better time,” the CEO a car-shopping service said.
  • Getting multiple offers could be worth thousands of dollars on the sale or trade of your old vehicle.
  • See more stories on Insider’s business page.

The used vehicle market is unusually hot going into the summer.

Used car and truck prices increased 10 percent in April and 7.3 percent in May, the highest of any consumer spending category included in the government’s measure of inflation.

Like the housing market, a lack of supply and a lot of demand is causing prices to soar to new records. Average used-vehicle prices topped $22,500 at the start of May, and are showing no signs of coming down any time soon.

“If you have a car to sell, there’s never been a better time,” said Pat Ryan, the CEO of CoPilot, a personalized car-shopping service. “Dealers will pay incredible prices.”

Of course, there are a few caveats to consider before rushing off to find a buyer, namely whether you need to replace the car, or if you’re trading it in for a new one.

Toby Russell, a co-CEO of the used-vehicle marketplace Shift, told Forbes earlier this month that his company was paying 25% more for vehicles than it did at the start of the year..

“Normally we would lose a little money on that, but we’re making money on these because auction pricing is so intense and high,” he said. “It’s just a total dislocation in the market caused by a surge in demand and lack of supply coming from new cars.”

Most used inventory comes from off-lease models or former rentals, but the pandemic disrupted that flow and in some cases caused it to reverse. When the chip crisis cut the supply of new cars, automakers curbed their fleet sales, forcing rental companies to buy used cars instead.

Ryan said he doesn’t see an end in sight for the lack of supply, which is down roughly 90 percent from normal for price-points below $20,000 – an issue he speculates could be related to buyers using government stimulus money.

“It’s not clear where the supply comes from, because there’s no used car factory you can ramp up and start producing,” he said. “The market could be like this for quite a while.”

So, if you have a car to sell or trade-in, Ryan recommends contacting several dealers to get a few bids. It’s not quick or easy, but it could be highly rewarding.

“We regularly see people who went to go offer their car online, and then they called another dealer and found there were $4,000 or $5,000 differences that were people were offering,” he said.

If you’re considering a trade-in, Ryan suggested that you would get the most bang for your buck swapping an in-demand crossover SUV or pickup truck for a higher-end sedan or compact from a maker that has been less affected by the chip shortage.

“Dealers are thirsting for inventory, there’s no question about it,” he said.

Read the original article on Business Insider

The game console inside the new Tesla Model X and S is powered by the chipmaker behind the PlayStation 5 and Xbox

Tesla Model S interior
Tesla Model S interior.

  • AMD’s CEO said the company made the computer chips that power Tesla’s new in-car gaming system.
  • Elon Musk has said the system will have processing power that’s similar to the Playstation 5.
  • The new gaming system is expected to debut later this month when Tesla releases its Model S Plaid.
  • See more stories on Insider’s business page.

AMD – the company known for making the computer chips that power the Playstation 5, as well as Xbox Series X and S – announced on Tuesday that it worked with Tesla on its infotainment system.

The system will have gaming-console-quality graphics with processing power just below Sony’s PS5, AMD CEO Lisa Su said during the company’s annual Computex keynote.

“We look forward to giving gamers a great platform for AAA gaming,” Su said.

She also said that higher-powered processors would only kick in when the infotainment system was running the AAA games that require more power, which would allow the systems to save battery power when playing games that require less processing power.

In January, Tesla announced its upgraded Model X and S cars would come with a new high-powered gaming system that would rival top gaming consoles like Playstation and Xbox. The company’s website said the system would have up to 10 teraflops of power, just 0.3 teraflops shy of the PS5’s processing power. Su confirmed that the chips which incorporate CPU and GPU into a single chip would have up to 10 teraflops of processing power.

The games can be played on two Tesla screens in the new Model S Plaid, which is expected to be released later this month. There is a 17-inch screen at the front of the vehicle, as well as a smaller rear screen for passengers.

On Saturday, Tesla CEO Elon Musk said the new car would start deliveries on June 10. The car’s release was delayed by several months due to the global shortage of computer chips that power the gaming console, as well as the vehicle’s navigation system, Autopilot, and bluetooth, to name a few.

Last month, Musk told investors at the company’s quarterly meeting that pandemic supply-chain issues had caused “insane difficulties” for Tesla. Tesla is even reportedly toying with the idea of buying chips for its cars in advance.

Last month, AMD said it anticipates at least another six months of video game chip shortages.

It won’t be the first Tesla to feature video games. Musk has been bolstering the gaming opportunities in his electric cars for years, but it will be the first car to essentially become a sophisticated video gaming console on wheels.

Read the original article on Business Insider

The chip shortage that’s wreaking havoc on supplies of cars, computers, and more could last another 2 years, experts say

FILE PHOTO - A researcher plants a semiconductor on an interface board during a research work to design and develop a semiconductor product at Tsinghua Unigroup research centre in Beijing, China, February 29, 2016.  REUTERS/Kim Kyung-Hoon
A researcher plants a semiconductor on an interface board during a research work to design and develop a semiconductor product at Tsinghua Unigroup research centre in Beijing

  • Semiconductors are an increasingly important component of products from laptops to lightbulbs.
  • Surging demand and disrupted supply have led to a severe lack of chips for a variety of industries.
  • Industry leaders and analysts are forecasting at least another year of shortages.
  • See more stories on Insider’s business page.

Semiconductor chips are in almost everything these days.

As Glenn O’Donnell, a vice president at Forrester Research, put it, “if it has a plug or a battery, it is probably full of chips.”

The global chip shortage that is jamming up auto manufacturers is rippling across nearly every industry that makes or uses tech-enabled products.

In particular, analysts say the boom in cloud computing and cryptocurrency mining, as well as the embedding of smart features in everything from doorbells to dishwashers, has led to a gold rush in the sector.

Read more: Auto Chip Crisis Is Threatening Recovery From the Pandemic

But a combination of factors have pinched the supply as demand continues ramping up, leading to severe shortages that industry leaders and analysts say could drag out into 2023.

We are looking at couple of years… before we get enough incremental capacity online to alleviate all aspects of the chip shortage,” IBM President Jim Whitehurst told the BBC. His company licenses microprocessor technology to the world’s leading chip makers.

Last week, Reinhard Ploss, CEO of German chipmaker Infineon, told CNBC his industry has never seen conditions like these, but that two years to normal seemed “too long.”

Other firms have painted even rosier forecasts – Taiwan Semiconductor Manufacturing Company (TSMC), the largest chip maker, said it expects to catch up with auto industry demand next month, and Cisco CEO Chuck Robbins, told the BBC the shortage would wind down later this year.

Analysts, however, are skeptical.

“Because demand will remain high and supply will remain constrained, we expect this shortage to last through 2022 and into 2023,” O’Donnell wrote on a Forrester blog. “We see nothing but boom times ahead for chip demand.”

Plurimi Investment Managers CIO Patrick Armstrong told CNBC he expects another 18 months of shortfalls.

“It’s not just autos. It’s phones. It’s the internet of everything. There’s so many goods now that have many more chips than they ever did in the past,” he said. “They’re all internet enabled.”

New production is coming online, with a $20 billion spend from Intel and a $28 billion investment from TSMC, but that does little to solve the immediate challenge facing the market right now.

Nobody is literally filling trash bags or gas cans with semiconductors, but Credit Suisse’s director of global economies and strategy, Wenzhe Zhao, said last week that inventory hoarding along the production chain is making a tight supply situation even worse.

For now, Forrester’s O’Donnell recommends tech buyers be patient, pay more, pick an alternative product or service, or make do with older tools until things return to normal.

Read the original article on Business Insider

Apple’s Tim Cook confirms iMac and iPad production will be delayed due to the crushing global chip shortage

Apple CEO Tim Cook.
Apple CEO Tim Cook.

  • Apple CEO Tim Cook said the chip shortage has caused the company to delay production of the iMac and iPad.
  • The global semiconductor shortage has hit automotive and tech companies hard in recent months.
  • Cook estimates Apple will lose $3-4 billion in revenue next quarter as a result of the shortage.
  • See more stories on Insider’s business page.

Shoppers may see shortages of iMacs and iPads on the shelves in the coming months.

Apple CEO Tim Cook told investors during the company’s quarterly earnings report that Apple has been hit by the computer chip shortage and has been forced to delay production on its iMac and iPad as a result.

While many speculated that Apple would be one of few companies to dodge the chip shortage, Cook confirmed the supply disruption was primarily impacting its “legacy node” chips.

The affected chips employ traditional manufacturing lines used by other automakers and tech companies that are also scrambling to procure semiconductor chips. The computer chips are involved in anything from cars to televisions, gaming systems, and home appliances. Rising demand from the work-from-home boom paired with COVID-19 shutdowns in the supply chain have made the chips an especially valuable commodity.

Cook said Apple was able to avoid any impact from the shortage in the previous quarter. That was mostly due to the fact that the company began producing its own chips last year. On most of its other products, Apple uses high powered computer chips that are not impacted by the shortage.

The CEO did not specify which semiconductor parts were in short supply or when the issue would be resolved.

“Most of our issue is on licensing those legacy nodes, there are many different people not only in the same industry, but across other industries that are using legacy nodes,” Cook said.

Luca Maestri, the company’s chief financial officer, said Apple would take a $3 billion to $4 billion revenue hit as a result of the semiconductor chip shortage.

“It’s a combination of the shortages as well as the very, very high level of demand that we are seeing for both iPad and iMac,” Maestri said.

Maestri told investors that the iMac has had the highest sales in the past three quarters in the history of the desktop. He pointed to the work-from-home boom which has continually pushed Apple’s profits higher during the pandemic.

Overall, Apple has been able to weather the chip shortage relatively unscathed compared to other tech and automotive companies.

In February, consulting firm Alix partners predicted the supply disruption could cause car companies to lose as much as $61 billion in revenue this year. Many automakers have been forced to shut down plants and prioritize which models to produce, as a result of the lack of computer chips. On Tuesday, Tesla CEO Elon Musk said the shortage has caused “insane difficulties” for the electric car company.

While the chip shortage has hit automotive companies the hardest, Dell and HP have been reporting the impact of the lack of semiconductors since the fall. Earlier this year, Sony and Nintendo said they have faced trouble producing gaming consoles due to the shortage.

Apple had a profitable quarter, smashing analysts’ expectations. The company was driven by the continued increase in demand for electronics and its second quarter saw all of Apple’s stores open for the first time since the pandemic started.

Read the original article on Business Insider

Cisco’s CEO says he expects computer chip shortages to last for another six months

Semiconductor manufacturing.
Nvidia semiconductor manufacturing.

Cisco’s chief executive Chuck Robbins said the global shortage of computer chips is expected to last for most of this year.

“We think we’ve got another six months to get through the short term,” he told the BBC.

Supply-chain disruptions in semiconductors have impacted many tech firms, caused by a surge in demand for electronics prompted by the COVID-19 pandemic and chip shortages at large production facilities, The Financial Times reported.

This has prompted providers to build out more capacity, Robbins told the BBC. And “that’ll get better and better over the next 12 to 18 months,” he said.

Expansion of capacity will be vital as demand soars. The shortage is a big problem, Robbins said, “because semiconductors go in virtually everything.”

As a result of the dwindling supply, makers of smartphones, televisions, and home appliances have seen delays in production, The disruptions are also affecting the production of other domestic appliances such as toasters and washing machines.

The COVID-19 pandemic is not the only possible factor in computer chip supply shortages. At the start of this month, the US added Chinese supercomputing companies to its export blacklist for assisting the Chinese military, Reuters reported.

Read the original article on Business Insider