"At some point, the dominoes start to fall"

The semiconductor market is particularly volatile. Over the past few decades, periods of shortage and surplus have alternated rather abruptly. Supply chain expert Gerald Haas explains what lessons from the past can be applied to the current semiconductor crisis.

What makes the current crisis different from ones that have come before it?

Gerald Haas:The difference is that in this case, we have a number of different factors coming together, and the effects aren't just adding up, they are multiplying. But, although we've never seen a shortage on this scale before, it is certainly not the first component crisis – it's a very volatile market.

What does that mean?

Haas: Supply surpluses continuously alternate with supply shortages. One moment, semiconductor producers are filing for bankruptcy because excess supply is causing prices to drop, and then suddenly demand exceeds supply and the prices shoot back up. That's also the reason that the number of different semiconductor manufacturers has shrunk dramatically in recent years.

What lessons can we learn from past crises?

Haas: What's interesting is to look at how past crises have ended. It's always been surprisingly abrupt. In principle, one would assume that the crisis is over as soon as production capacities have reached the demand level. However, in the past it's happened earlier than that. In times of shortage, there are some on the market that intentionally hoard materials or even speculate with them. On top of that, companies tend to order more than they actually need out of caution.

What consequences does that have?

Haas: At some point, the dominoes start to fall. A first speculator foresees the end of the shortage and starts unloading the hoarded material. The price drops, and others on the market begin to empty their stocks as well to avoid losses. Then, companies see that they no longer need to plan in excess buffers – and suddenly the supply has surpassed the demand. I am confident that we'll see the same phenomenon with this current crisis as well.

Thanks for your time!

Gerald Haas

Supply chain expert, B&R


"At some point, the dominoes start to fall"

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