1. During the pandemic, consumer durables went from ~10-11% of consumption to ~13%. 3 percentage points of consumption is about half a trillion dollars annually. Many of these durables come with cheap microcontrollers or even high end SoCs now. New vehicles have dozens of cheap microcontrollers.
https://fred.stlouisfed.org/graph/fredgraph.png?g=Ktkq2. If you look at that chart, you will see that the decade previous to the pandemic was the worst ever for durable goods demand. Supply chains had adjusted to that.
3. Supply chains had also all gone to a JIT model to keep inventories lower. This was a huge source of efficiencies, but made them vulnerable to a demand shock.
4. There are new sources of chip demand in EVs.
5. There are new sources of chip demand for very cheap ARM and RISC-V chips. High volume, low margin stuff that has been underinvested for manufacturing, like the entire auto chip chain.
6. 2019 was a down cycle, and companies were idling capacity.
7. When the pandemic hit, companies projected lower demand, and idled more capacity. This put them in a huge hole from which they still have not extricated themselves.
8. COVID outbreaks in Asian factories complicate things
9. Transportation bottlenecks complicate things
2. If you look at that chart, you will see that the decade previous to the pandemic was the worst ever for durable goods demand. Supply chains had adjusted to that.
3. Supply chains had also all gone to a JIT model to keep inventories lower. This was a huge source of efficiencies, but made them vulnerable to a demand shock.
4. There are new sources of chip demand in EVs.
5. There are new sources of chip demand for very cheap ARM and RISC-V chips. High volume, low margin stuff that has been underinvested for manufacturing, like the entire auto chip chain.
6. 2019 was a down cycle, and companies were idling capacity.
7. When the pandemic hit, companies projected lower demand, and idled more capacity. This put them in a huge hole from which they still have not extricated themselves.
8. COVID outbreaks in Asian factories complicate things
9. Transportation bottlenecks complicate things