If the previous cycle was defined by infrastructure projects, this second version of cyclical recovery focuses more on computer chips that are powering the world around us
Computer chips, or semiconductors, power everything from cars to consumer electronics, such as PCs, gaming consoles and smartphones. The recent shortage in this valuable resource has significant implications for consumer prices, company profits, employment, inflation, and even national security.
Currently, two key factors are driving the shortage: a COVID-19-driven disruption to supply and demand dynamics and ongoing geopolitical tensions between the U.S. and China.
"Times have changed. If the previous cycle was defined by infrastructure projects as the main recipient of public investment funds, this second version of cyclical recovery focuses more on ethereal elements that surround and support us: it's chips, not bricks, that matter."
Over the longer term, PIMCO's Geraldine Sundstrom expects this may lead to a ‘semiconductor supercycle' with continued demand from traditional sources, such as consumer electronics, supplemented by increasing demand from newer sources, such as chips for artificial intelligence (AI) applications.