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Less than a month into 2022, manufacturers have a limited supply of semiconductors. Such a shortage so early in the year could signal long-term problems for supply chains if market players do not find short-term solutions.

The conditions that created a global semiconductor shortage last year – explosive demand, factory shutdownsand supply disruptions – are still in play in the market and have prolonged the chip crisis well into 2022. As industry insiders, investors and policymakers from Washington to Beijing to Brussels have made progress in dealing with the adverse effects of the chip crisis on automakers, solar power providers, medical device makers and smartphone and other technology companies, the situation is likely to persist throughout this year.

“The semiconductor industry faced one of the largest and most widespread supply shortages in industry history in 2021 as low inventory levels and tight capacity constraints in factories have limited the ability of businesses to respond to rapidly rebounding demand, particularly for durable goods.We expect conditions to remain tight across the industry as the semis -drivers is posting another year of strong growth in 2022, but a moderate slowdown in demand, additional capacity growth and new ordering practices should alleviate some of the disruption by the end of the year,” S&P Global Ratings said in its predictions of key industry trends published yesterday. “Notwithstanding this expectation of a moderate easing of conditions, we expect a slight slack in the supply chain to persist and the industry’s ability to respond quickly to unexpected shocks, such as a higher-than-expected demand growth or a supply disruption due to geopolitical conflict, remains extremely limited.

After a momentous 2021, in which global semiconductor industry revenues soared around 26% to nearly $550 billion, this year is expected to bring more moderate growth of 9 .3% as the industry continues to operate in a matrix to meet demand before new capacity investment becomes available, according to S&P Global Ratings. In the meantime, a prolonged chip crunch could complicate the recovery from the pandemic-induced slowdown, exacerbated by the omicron variant which continues to weigh on mobility and demand.

Globally, the shortage of semiconductors could reduce the approximately 5.7 million light vehicles produced in 2022 before supply catches up with demand in early 2023, according to S&P Global Platts Analytics. Automotive sales remained below pre-pandemic levels in some markets last year due to the chip crisis.

The US Department of Commerce warned in a report released yesterday that manufacturers’ median chip inventory had shrunk to a five-day supply at the end of last year. US supply chains are already feeling the strain omicron-related disruptions in Asiaand smaller market players bear heavier burdens of the continued shortage of chips, according to S&P Global Market Intelligence.

“A covid outbreak, a storm, a natural disaster, political instability, an equipment problem – really anything that disrupts a [chip-making] anywhere in the world, we will feel the ramifications here in the United States of America,” Commerce Secretary Gina Raimondo said yesterday during a briefing on the report, explaining how the fragility of the chain supply of semiconductors has left no room for error. “A covid outbreak in Malaysia has the potential to shut down a manufacturing plant in America.”

As an abundance of chips is expected to flood the market next year, a long-term solution to the situation may be to “relocate” supply chains. Market players have expressed the need to ensure consistent chip capacity. As recently as January 21, multinational technology company Intel announced that it would invest more than $20 billion to build two semiconductor factories in Ohio from this year to begin production in 2025. Dutch automaker Stellantis and Taiwanese multinational technology company Hon Hai Technology Group, known as Foxconn, teamed up in December to create purpose-built semiconductors for vehicle production, according to S&P Global Platts.

While allowing greater geographic diversity in chip manufacturing facilities would help offset shortages by invigorating demand and stimulating competition, “centralizing any component that would be critical to any kind of infrastructure comes with risks,” said 451 Research analyst James Sanders. S&P Global Market Intelligence.

Today is Wednesday, January 26, 2022and here is today’s essential intelligence.

Economy


Asia-Pacific Banking Outlook 2022: The long and winding road (to COVID recovery)

About two-thirds of the Asia-Pacific bank rating outlook is stable, reflecting improving economies and a continued rebound from the worst effects of the pandemic. Regional lenders still face a diverse set of risks, primarily developer defaults and falling house prices in China, and weak economies in Southeast Asia. The possibility of economic recoveries stalling, amid heightened public and private sector leverage during the pandemic, adds to banks’ risks.

—Read the full report of S&P Global Ratings

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Capital markets


Risks to Polish bank stocks could outweigh earnings improvements in 2022

Polish banks have been the stars of the Warsaw Stock Exchange in 2021 and have outperformed other European lenders in share price growth, with the WIG Banks Index rising 87% over the year. An economic recovery from the COVID-19 pandemic and multiple rate hikes mean that 2022 is poised to be a strong year for Polish lenders’ balance sheets. Much of this positive momentum has already been priced into bank stock prices, and risk factors such as rising inflation and the long saga around Swiss franc mortgage exposures are becoming increasingly apparent. obvious.

—Read the full article from S&P Global Market Intelligence

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International trade


Commodities 2022: Chinese lithium markets will face supply compression

China’s lithium market is expected to face tighter supply throughout 2022 as the mismatch between demand and supply widens, a development that is expected to keep domestic prices high, according to the S&P Global Platts China Battery Metals Outlook for 2022. As battery production capacity continues to expand, fueled by expectations of strong electric vehicle sales amid intensifying decarbonization efforts, it is almost certain that China’s lithium demand will increase further this year.

—Read the full article from S&P Global Dishes

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ESG


Listen: Climate-related disasters in the United States cost $145 billion in 2021 and more, scientists say

In 2021, the world has seen many major climate-related disasters, ranging from wildfires to floods and hurricanes. The U.S. National Oceanic and Atmospheric Administration, or NOAA, recently released its annual Climate Trends Report, providing important insight into the physical risks of climate change in the United States. The report also puts a price on these risks: disasters reached $145 billion in 2021.

—Listen and subscribe to ESG Insider, a podcast from S&P Global

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Energy and raw materials


Listen: Systems Thinking Approach Highlights Weaknesses in Key Indicators of Global Energy Innovation

Countries around the world pledged to maintain the goal of limiting global temperature rise to 1.5 degrees Celsius at the last United Nations Climate Change Conference in Glasgow, Scotland. But looking at overall global performance across key indicators of clean energy innovation, a new report from the Information Technology and Innovation Foundation has revealed ‘a global lack of urgency’. . And without an immediate increase in efforts by countries working with the private sector, the report suggests that the chances of mitigating the worst impacts of climate change will dwindle.

—Listen and subscribe to Capitol Crude, a podcast from S&P Global Dishes

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Technology and media


Key Industry Trends 2022: Technology

S&P Global Ratings’ Industry Top Trends series presents its industry experts’ assumptions for 24 global sectors in 2022. They examine what has changed, what are the key assumptions for 2022 and what are the main risks. For technology, the strength of the sector will continue in 2022.

—Read the full report of S&P Global Ratings

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Written by Molly Mintz.