FSA COMMITTEE
FSA NEWSWEEK
12th March 2021
USA Stimulus Package
Stimulus checks are set to be handed out to US households after the Democrat-controlled Senate approved President Biden’s $US1.9 trillion coronavirus relief stimulus.
The bill was given approval by the house with a 220-211 victory as every Republican and a sole Democrat voted against the bill, providing $US1,400 to low- and middle-income Americans, administering new child tax benefits to families, and increasing unemployment payments for Americans still looking for a job.
The checks will cost around $US400 billion in total with the other $US1.5 trillion spent on other stimulus measures. This builds off the last aid package, which was enacted in December and increased unemployment payments by $300 a week, also extending them until the 14th of March.
With millions of Americans still out of work, and the poverty level still high at around 11%, the US economy is still unlikely to fully recover until the amount of Covid-19 cases are reduced significantly. The bill provides $US75 billion for vaccines, testing, tracing and procurement, to help ensure cases are reduced quickly and rapidly. President Biden has set a goal of vaccinating 100 million people in his first 100 days which will be a difficult task, albeit a strong goal to aim for in order to get the country back on track.
Another of Biden’s goals is to get children back into the classroom, with around $US200 billion investment in education, from childcare to college.
$US350 billion is going towards aiding state and local governments, which was strongly criticised by Republicans as the National Association of State Budget Officers reported that revenue had only declined by 1.6% compared to the previous year.
References:
How A Global Shortage of Silicon Chips Is Affecting Consumer Electronics
Despite millennia of advancement, technology and humans are still subject to the forces of nature. When the pandemic first hit, manufacturers across multiple industries and countries had to scale down their production because of covid restrictions and social distancing requirements. Silicon chip manufacturers were no exception to this and as a result, there were supply-side shortages across the tech industry.
More recently, TSMC, which is one of the leading exporters of chips in the world, has been affected by drought in its home country of Taiwan. Water shortages across the country have stunted its production as the company says it uses 156,000 tons of water a day to operate normally.
Why does this matter?
Silicon chips are an essential manufacturing component of most popular electronics such as laptops, smartphones, headphones, and gaming consoles. While their supply became limited, demand for electronics exploded under the pandemic when millions of people suddenly needed to upgrade their laptops and tech for work from home setups. Additionally, with COVID restrictions and lockdowns in several countries, demand for home entertainment also rose significantly, with many opting to purchase new gaming consoles, TVs, and headphones. This combination of increased demand and curtailed supply has led to issues for both consumers and tech giants such as Apple and Samsung.
Many smartphones, laptops, and other products are going out of stock and the ones that are available may have increased prices. Companies like AMD are directing their limited supply of chips primarily towards their popular models and line ups while less popular models may be left out for now. Additionally, Apple has plans to cut iPhone production by about 20% for the first half of 2021.
So far one of the largest affected industries has been that of gaming consoles and equipment. Sony’s recently released Playstation 5 has been frequently selling out globally as their supply chain remains restricted. Similarly, AMD and Nvidia which produce graphics cards and processors for gaming PC’s have had increasingly limited stock of their popular models.
What’s next?
Most companies expect shortages to last at least through the next quarter as they work on securing new supply chains. Moving forward, the US and Europe plan to reduce their reliance on Asia for chips as several tech bodies are lobbying the White House for tax incentives related to local chip manufacturing. Meanwhile, the European Commission presented its ‘2030 Digital Compass’ plan, in which it aims to have Europe produce 20% of the world’s supply of semiconductors by 2030.
For now, consumers will need to remain patient while companies continue to adapt to the situation.
References:
https://www.ft.com/content/74038c71-f0a2-41e0-8cc3-5f61a6157931
https://www.nytimes.com/wirecutter/blog/silicon-chip-shortage-delays/
The views expressed within this article are those of the authors and do not represent the views of the Finance Student's Association. All images and references in this article are for fair and educational purposes only. The content in this article is not intended as legal, financial or investment advice and should not be construed or relied on as such.