The global computer chip shortage could have larger ramifications than making it harder to buy the latest video game console or more expensive to buy a car. According to a new Goldman Sachs (GS) note, the slowdown in chip availability could in theory smack U.S. GDP by as much as 1% in 2021.
In a research note led by Goldman’s Spencer Hill, an analysis looked at the economy-wide effects of the shortage by assuming a 20% chip shortfall that lasts three quarters and affects the 169 U.S. industries that use semiconductors in their products.
“Some computer chips have no available substitute, and if output of every product that uses chips were to decline proportionately, the drag on 2021 GDP would be around 1%,” the note said, while noting that in reality the drag will likely be smaller, in part, because firms will find ways to reconfigure their products.
Still, prices on goods impacted by the shortage — including autos and consumer electronics — could also rise by as much as 1% to 3%, which could temporarily boost core inflation by 0.1 to 0.4 percentage points, according to Hill.
And while semiconductors in the U.S. account for 0.3% of the nation’s GDP, the components they go into make up a massive 12%. What’s more, both Intel (INTC) and TSMC, two of the world’s largest chip makers, have said the delays in chip manufacturing could last into 2022.
Why there’s a massive global chip shortage
The global chip shortage began at the beginning of the pandemic, when automakers, assuming that sales of cars and trucks would collapse due to lockdowns, began slowing purchases of various components including chips.
Those chips have become essential to autos over the years controlling everything from fuel usage to diagnostics, and their infotainment centers.