Five lessons from the semiconductor shortage


BofA with the note, in the hope that Canberra gives a flying $%&#:

Autos, chips and Covid: five economic lessons

Global supply chains are in disarray. A series of pandemic-related shocks have disrupted production, while goods demand has soared as consumers have substituted away from high-touch services. Each item faces its own specific set of issues, but many of the underlying problems are similar. Here we look at these problems and draw five economic lessons by digging deeper into one of the most widely-discussed stories: the auto production disruption driven by the shortage of semiconductors. We argue:
• A supply chain is only as strong as its weakest link. Seemingly small disruptions can snowball into a big economic loss.
• There is a strong case for diversification / localization of supply chains, but it will be hard to reduce dependence on Asia.
• “Transitory” goods price increases might turn out to be uncomfortably sticky, weighing on the consumer outlook.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.