World's Largest iPhone Assembler Says Congested Supply Chains Are About To Ease

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by Tyler Durden
Friday, Feb 11, 2022 - 03:00 AM

Global supply chains have faced severe disruptions for almost two years, including port congestion and vessel bottlenecks that have resulted in soaring shipping rates and longer delivery times, adding to some of the hidest consumer inflation in four decades. Electronic component shortages have also been a significant issue and have led some manufacturing facilities to limit and or even halt production of finished goods. Now there are emerging signs and growing speculation that supply chains could ease in the second half of this year. 

Bloomberg reports not any consumer electronics assembler but the world's largest one, Hon Hai Precision Industry Co., otherwise known as Foxconn Technology Group (too many of us in the West), the assembler of BlackBerry, iPad, iPhone, iPod, Kindle, Nokia devices, PlayStation 4, Wii U, and Xbox One, among many another popular consumer electronics, is expecting significant improvement in sourcing semiconductors in the first quarter and an overall improvement in their supply chain by summer. 

James Wu, a spokesman for Hon Hai Precision Industry Co, was quoted at a company event in Taipei on Thursday, who said parts shortages are easing now and "overall supply constraints" will ease in the second half of this year. 

Wu said the Hon Hai purchases upwards of $55 billion in semiconductor chips every year and aims to minimize disruptions later this year. The company forecasts first-quarter revenue to be the same (or little changed) compared to a year ago. 

In the last two years, a shortage of semiconductor components has crippled parts of the complex global supply chain as pandemic-related shutdowns and soaring demand for electronics due to fiscal stimulus checks induced shortages. Severe disruptions led some automakers in the US to shut down manufacturing facilities due to the lack of critical chips, forcing the Biden administration to address the alarming issue by producing more chips domestically. 

Even though Taiwan Semiconductor Manufacturing Co. and other peers have said chip supply will remain tight this year, there are emerging signs that supply chains are easing. 

On Wednesday, AP Moller-Maersk, the world's largest shipper, suggested the climax of global supply-chains snarls has passed, and bottlenecks will alleviate in the second half of the year. A leading indicator of this would be major transpacific shipping freight rates likely topping out. 

And it's not just Maersk. JP Morgan recently told clients that global supply chain constraints would begin to ease later this year.