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   Strategies & Market TrendsTechnical analysis for shorts & longs

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To: Johnny Canuck who wrote (53198)2/10/2021 7:11:41 PM
From: Johnny Canuck
   of 55832

Why there’s a chip shortage that’s hurting everything from the PlayStation 5 to the Chevy Malibu



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A chip shortage that started in a surge in demand for personal computers and other electronics for work or school from home during the pandemic now threatens to snarl car production around the world.Semiconductors are in short supply because of big demand for electronics, shifting business models which include outsourcing production, and effects from former President Donald Trump’s trade war.Chips are likely to remain in short supply in coming months as demand remains higher than ever.

A close up image of a CPU socket and motherboard laying on the table.

Narumon Bowonkitwanchai | Moment | Getty Images

A chip shortage that started as consumers stocked up on personal computers and other electronics during the Covid-19 pandemic now threatens to snarl car production around the world.

On Tuesday, GM said that it would extend production cuts in the U.S., Canada, and Mexico until the middle of March. They join a long list of major automakers, including Ford, Honda and Fiat Chrysler, which have warned investors or slowed vehicle production because of the chip shortage.

But it’s not just the automotive industry that’s struggling to get enough semiconductors to build their products. AMD and Qualcomm, which sell chips to most of the top electronics firms, have noted the shortage in recent weeks. Sony blamed the chip shortage for why it’s so hard to get a PlayStation 5 game console.

Chips are likely to remain in short supply in coming months as demand remains higher than ever. The Semiconductor Industry Association said in December that global chip sales would grow 8.4% in 2021 from 2020's total of $433 billion. That’s up from 5.1% growth between 2019 and 2020 -- a notable jump, given how large the absolute numbers are.

Semiconductors are in short supply because of strong demand for electronics, shifting business models in the semiconductor world that created a bottleneck among outsourced chip factories, and effects from the U.S. trade war with China that started under former President Trump.

A huge boom in electronics sales

The Covid-19 pandemic has spurred demand for consumer electronics.

The first wave involved people buying PCs, monitors and other gear for working or going to school remotely. Then, last fall, home entertainment gadgets like game consoles, TVs, smartphones and and tablets started flying off the shelves.

Living room with a Sony PlayStation 5 home video game console and DualSense controller alongside a television, taken on Novemebr 3, 2020.

Phil Barker | Future Publishing via Getty Images

PC sales were up 4.8% in 2020 to 275 million units, with over 10% growth in the holiday season, according to Gartner data. That reversed a years-long decline, and is the highest annual growth in the PC market since 2010.

Other gadgets sold well, too. The Consumer Tech Association, an American trade group, said that 2020 was the biggest year on record with nearly $442 billion in retail sales revenue, and is projecting big demand for game consoles, headphones, and smart home products in 2021.

All these devices include a ton of chips — not just the central processor which can cost tens or hundreds of dollars, but also less expensive little chips for controlling the display, or managing power, or operating a 5G modem.

“The current chip shortage all starts with the unprecedented demand for personal computers and peripherals as the globe worked and attended school from home,” said Patrick Moorhead, founder of Moor Insights, a firm that studies the semiconductor industry.

Electronic industry giants that have reported record sales say that they could’ve been even better if there was enough supply. Apple, which recently reported a blowout $111 billion quarter, told analysts it didn’t have enough supply of its new iPhones to meet demand. CEO Tim Cook told Reuters that “semiconductors are very tight.”

AMD CEO Lisa Su, which makes the processor at the heart of Sony’s and Microsoft’s new consoles, said last month that it expects shortages through the first half of the year, at least. “The industry does need to increase the overall capacity levels,” Su said.

Business shift to outsourcing slams factories

The shortage is highlighting a structural change in the semiconductor industry. Many of the top semiconductor companies are now “fabless,” which means that they only design the chips and the technology in them. Other companies, known as foundries, are largely contracted to actually make the chips.

The foundries are run by companies like TSMC in Taiwan or Samsung in South Korea -- and as it turns out, they were already making chips as fast as they could. If a company cut orders in the early days of the pandemic, they had to get back in line.

Carmakers aren’t directly competing with high-tech companies for the same chip supply. Car chips are usually based on older chip manufacturing technologies and don’t need the bleeding edge.

The Ford company logo is displayed on a sign outside of the Chicago Assembly Plant on February 03, 2021 in Chicago, Illinois.

Scott Olson | Getty Images

But the shortage isn’t just in the fastest chips — it’s in everything.

“The shortage in the semiconductor industry is across the board,” said incoming Qualcomm CEO Cristiano Amon last month. “Not only leading nodes but legacy nodes,” referring to chip manufacturing technology.

Cars now include scores of tiny chips, many of which perform functions like power management. Cars also use a lot of microcontrollers, which can control traditional automotive tasks like power steering, or are the brain at the heart of an infotainment system. Car makers also usually use “just-in-time” production, which means they avoid having extra parts in storage.

“The problem is even if that 10-cent chip is missing, you can’t sell your $30,000 car,” Gaurav Gupta, semiconductor analyst at Gartner said.

“If the chip that powers the in-car dials or automatic braking are delayed, then so will the rest of the vehicle,” Bryce Johnstone, director of automotive segment marketing at chip designer Imagination Technologies previously told CNBC.

Now the automotive industry is realizing it’s a lower priority than the electronics companies at the foundries. In 2020, only 3% of TSMC’s sales were from automotive chips, compared to 48% for smartphones.

Tech companies are “the volume guys. They have higher margins. And they never cut down their orders and have long-term contracts with the foundries,” Gupta said. “Now that this auto demand peaked faster that the OEMs had expected, autos can’t get back in the queue.”

The foundries are aware of the issue. TSMC, which is seen as the most advanced and important foundry, said that it was trying to help the auto companies, and said it would spend as much as $28 billion this year to increase its capacity.

“While our capacity is fully utilized with demand from every sector, TSMC is reallocating our wafer capacity to support the worldwide automotive industry,” TSMC said in a statement in January.

Car manufacturers also use automotive-grade chips, which are painstakingly “qualified” against binders of industry standards to make sure they’re durable and reliable. “It is more difficult for the industry to alternatively transition its production lines and supply chains elsewhere,” Trendforce, a consulting group covering the semiconductor industry, wrote in a report last month.

Trump’s trade war

Last last year, the U.S. placed restrictions on Semiconductor Manufacturing International (SMIC), the biggest foundry in China, barring it from getting advanced chip manufacturing gear, and making it much harder to sell its finished products to companies with U.S. ties. Customers needed to shift their orders to competitors like TSMC, Gupta said.

SMIC executives acknowledged that the U.S. move has prevented it from using its full capacity when it said geopolitical factors would prevent it from seizing “this year’s rare market opportunity,” referring to the chip shortage.

Some companies also decided to stockpile essential chips ahead of the U.S. deadline, using up production capacity last year. For example, Huawei stockpiled critical radio chips ahead of sanctions, Bloomberg News reported.

Stockpiling was also driven by supply concerns as Covid swept across the world. SK Hynix, a major memory chip maker, said last July it saw a surge of sales driven by “growing anxiety about IT supply chain in general.”

Some companies that stockpiled chips are reaping the benefits now. Toyota said on Wednesday that it doesn’t expect to reduce its rate of production because it had stockpiled four months worth of chips to ride out the shortage. Toyota raised its full-year earnings forecast by 54%.

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From: Cogito Ergo Sum2/13/2021 5:24:58 PM
   of 55832

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To: Johnny Canuck who wrote (53655)2/14/2021 6:56:44 PM
From: Johnny Canuck
1 Recommendation   of 55832
SP500 advancing to new high but on slowing momentum. This index and the market needs a catalyst to move higher.

DOW flatlining after setting a new high recently.

DOW transports setting a new high, confirming the recent high on DOW.

DOW utilities in short term sideways trend. Stable interest rates is what the market needs.

COMPQ setting new highs on declining volume.

Russell 2000 resting after a exponential advance. It should break one way or the other in the next few days.
On the downside support is at 1420.

Financials testing the previous high from a few weeks ago. It need to break to a new high in the next 2 to 3 weeks or it will correct down before making another attempt at a high.

Energy stopping short of setting a new high on declining volume. This is the second attempt in the last few weeks. It needs to break out soon or it will correct before another attempt.

Gold still in an intermediate done trend. It is below major support level based on price by volume.

Silver in an intermediate sideways trend. It is chaotic but still sideways. It is just at a major support level. A break will lead to a 10 percent correction.

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To: Johnny Canuck who wrote (53657)2/14/2021 7:03:29 PM
From: Johnny Canuck
1 Recommendation   of 55832
Long term chart of gold indicates it is at an important support level that has been test a few times in the last year to 18 months.

Next support below it 1650 and then1450.

Short term gold may be oversold due to interest in Crypto currencies.

Given the volatility Crypto currencies are not the store of wealth it needs to be.

Governments can easily issue their own crypto currencies which would make it legitimate but also take
all the wind out of Bitcoin and other crypto currencies.

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To: Cogito Ergo Sum who wrote (53656)2/14/2021 7:10:01 PM
From: Johnny Canuck
   of 55832
I think it is the same problem with funds that grow too quickly due to some initial success. It is easily to place $1 billion in 30 or 40 companies but it is more difficult to place $14 billion or more.

You can easily double from $200 million to $400 million but it is really tough to go from $10 billion to $20 billion due to gains in stock price.

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To: Johnny Canuck who wrote (53659)2/14/2021 7:52:38 PM
From: Johnny Canuck
1 Recommendation   of 55832
SLV: "Authorized Participants May Be Unable to Acquire Sufficient Silver..."

SLV: "Authorized Participants May Be Unable to Acquire Sufficient Silver..." | ZeroHedge

Johnny: This is have been part of the underlying flaw of the ETF industry. They are more outstanding shares in the ETFs than there are shares in some of the stocks in the indices.

No sure if or when this becomes the next stock market crisis.

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To: Johnny Canuck who wrote (53660)2/14/2021 11:55:56 PM
From: Johnny Canuck
   of 55832
Jim Rogers: Stock Market Blowup in April Not Crazy Talk, Tips for Surviving Worst Bubble Ever

Jim Rogers: Stock Market Blowup in April Not Crazy Talk, Tips for Surviving Worst Bubble Ever - YouTube

Johnny: Interesting comment about potential demand for silver and cooper due to electric car content.

Also interesting comment about commodities being cheap relative to real estate, gold and the US stock market.

Some comments on sovereign debt around the world potentially resulting in the worst correction in our lifetime.

Not sure I agree US cash will be a safe haven in a sovereign debt crisis due to the large absolute total debt.

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To: da_spot who wrote (53535)2/15/2021 2:13:48 AM
From: Johnny Canuck
   of 55832
Congrats if you got into SI in the high 20s. Put in on my screen as one of a handful of "cult stocks" to watch for signs of a crash but my days of trading momentum stocks with no near term achievable model are over. I am too close to retirement down the road.

I believe in Block Chain as a technology to securely track a process. I believe in a form of crypto currency as a store of wealth if it backed by gold or a Federal Bank and meets the criteria of relative stability. None of that exists today and the barriers to Federal Banks entering the sector and making the existing crypto currencies obsolete is low. The cost of doing a transaction in an exist crypto currency is still high relative to other forms of money transfer. I also am not sure I believe crypto currencies are a hedge against a sovereign debt crisis that devalues currencies worldwide.

Enjoy the ride. It has been fun to watch but I am sitting on the sidelines watching this sector.

I noticed a few value traders entering the sector. Either I am missing something or close to the last fool in getting in. :)

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To: Johnny Canuck who wrote (53662)2/15/2021 6:27:56 AM
From: Johnny Canuck
   of 55832
Want to see how easy it is to create a Crypto Currency and why the barrier to entry to low watch this video:

The TRUTH About $1 Dogecoin - YouTube

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To: Johnny Canuck who wrote (53659)2/15/2021 9:22:27 AM
From: Cogito Ergo Sum
   of 55832

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