Record inflation will increase the price of your next phone

If you’re already dealing with pain at the pump and rising prices for everything from ramen to rent, buckle up for more unpleasant news. The fastest inflation increase in four decades also means a year of more expensive phones, laptops and other gadgets.

While almost anyone with a wallet and internet access knows that inflation has been rising for much of the year, a new report from the Labor Department released Tuesday reinforced the seriousness of the problem. According to the ministry’s monthly consumer price index report, inflation rose 8.5% in March. This is the fastest inflation rate increase since 1981. Add to that an already turbulent global supply chain poised for another round of disruption, and consumers are left with an uncomfortable and costly road ahead. .

Although it takes time for everyday gadget shoppers to feel the full pressure of inflation, there is already evidence of significant price increases for some electronics. According to a Canalys report released this week, global PC shipments in the first quarter of 2022 fell year-over-year for the first time since the same quarter in 2020. Despite a 3% drop in shipments, revenue world of PCs in fact increased a whopping 15%. In other words, PC makers are making more money even though they’re selling fewer products than before.

“Global earthquake events negatively impacted both demand and supply, hitting the industry at a time when consumer and education buying both naturally slowed after the highs in the last year,” wrote Canalys senior analyst Ishan Dutt. “The war in Ukraine has exacerbated the inflationary environment in major markets by driving up the price of commodities, ranging from oil and gas to metals to foodstuffs.”

This drop in PC shipments marks the first slowdown after seven consecutive quarters of growth, in part due to the pandemic-driven pivot towards remote work. Laptop prices have been rising at least since last October, according to IDC program vice president Ryan Reith. In an interview with The register In October, Reith said the average laptop price jumped to US$820 ($1,138), from US$790 ($1,097) in the same period a year earlier.

All of these price increases start early in a device’s long journey to your doormat. Last year, TSMC, which dominates about half of the global semiconductor chip foundry market, announced it would raise prices by up to 20%, its biggest increase in a decade. Now, Nikkei Asia notes, other chipmakers have followed suit and raised their own prices, in some cases even exceeding TSMC’s price. While some of the bigger, cash-rich brands like Apple can bypass some of these price increases and offset the costs, most smaller companies inevitably end up passing these increased prices on to their prospective customers.

There’s good reason to believe that similar price increases could ripple throughout the smartphone industry. A recent report by Counterpoint Research determined that the average price of smartphones worldwide has fallen from US$287 ($398) in 2020 to US$308 ($428) in 2021 due to a mix of chain delays supply and inflation. Counterpoint also expects some price increase for 2022 and predicts that some phone makers may end up deprioritizing more affordable budget phone models to focus on shinier, more expensive models with higher profit margins. . That’s great for device makers, but not so good for regular people trying to get their hands on a new phone at a reasonable price.

But wait, there’s more trouble where that came from

Unfortunately, for anyone interested in buying a new device in the near future, even remotely, inflation isn’t the only issue to worry about. Just when critical component supply shortages looked set to recover from a pandemic-induced shortage, Russia moved to invade Ukraine. Less than a month after crossing the border, Russia had forced the two main Ukrainian neon suppliers to suspend their operations. This is a major problem for the production of gadgets, since neon is of crucial importance for the manufacture of semiconductor chips. About half of the world’s semiconductor-grade neon comes from these two Ukrainian suppliers.

The pandemic has not finished stirring its shit bucket either. While most cities across the United States are shedding the last vestiges of covid-19 precautions, the same cannot be said for China and Taiwan, where a resurgent outbreak has forced businesses and even entire cities like Shanghai to close. On Wednesday, Reuters reported that more than 30 Taiwanese companies, many of which manufacture electronic components, said they would halt operations for at least another week because of the virus. Pegatron, a Taiwanese company responsible for producing about 20 to 30 percent of Apple’s iPhones, announced it was halting production in Shanghai.

The combined effect of inflation, war in Europe and pandemic-related supply disruptions will likely result in even higher prices in the not-too-distant future. All of this could potentially escalate and escalate quickly. A protracted and escalating war in Ukraine could make it even more difficult to bring neon installations back online, while new variants of the virus, however unlikely, could further derail production of key components.

Even in the best-case scenario of war in Ukraine, the pandemic, and inflation, all signs point to rising prices for gadgets. The only real question is how steep these will be and for how long.

About Raymond A. Bentley

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