This is Exchanges at Goldman Sachs and I'm Allison Nathan of Goldman Sachs research.

Today we're going to explore the global chip

shortage and why it's causing major real world consequences. To do that I'm joined by three of my

colleagues in Goldman Sachs research. To shihi, Khodayuzawa, and Rod Hall.

We'll first turn to Toshiya, who covers the U.S. semiconductor sectors for us.

Toshiya, welcome to the program.

Thanks for having me, Allison. Doshiya, the to the program. Thanks for having me, Allison.

Toshiya, the semiconductor chip shortage is impacting so many industries.

We're seeing nearly daily stories about another industry being disrupted by it.

Rewind the clock for us and describe how the industry got to this point.

Sure. So if we rewind the clock to early 2020, The semiconductor industry had just gone through a prolonged downturn

driven primarily by an inventory correction in the supply chain and in our view was on the verge of a cyclical upturn. But then COVID hit in the spring and the knee jerk reaction on the part of the customers of the semiconductor companies that we cover was to reduce or cancel orders

in anticipation of a weaker demand environment.

What transpired immediately post the emergence of COVID

and during the pandemic was very different though and if anything the complete reverse happened in many applications

Many of us working from home learning from home went out and bought things like PCs, game consoles, Wi-Fi routers, and demand

for cars increased as well as people moved to the suburbs and avoid taking public transportation.

On the supply side of the equation,

not only did the suppliers step on the brakes

when customers reduced or canceled orders,

but the lockdown measures that were in place

across many regions made it very difficult for the supply chain

...