China Fines Chip Distributors for Price Gauging
Conducting business in China has many nuances that would seem foreign to many, but it seems that taking advantage of imbalances in supply and demand is one that is common to almost all regions of the globe. In some cases it is a function of double ordering or inflating potential targets to increase leverage with producers, while in other cases it is just buying whatever is in short supply and hiking prices until buyer’s eye begin to bleed. In many cases governments look the other way, but when it comes down to how such unsavory practices affect state or other high profile businesses, the Chinese government has a tendency to take action.
It seems that three Chinese electronics distributors took advantage of the supply/demand imbalance facing vehicle manufacturers, particularly when foundries were also facing COVID-19 staffing issues, earthquakes in Japan, and a blizzard in Texas that exacerbated the imbalance that foundries were already facing from increased semiconductor demand from increasing electric vehicle production. According to a briefing by the State Administration of Market Supervision, the shortage of chips, particularly those needed for electric vehicles, has reduced such vehicle production in China, and when tracing back the cause for such issues, it was found that the three chip distributors had ‘maliciously snapped up chips in China, hoarding them and driving up prices. Causing the prices of some chips to continue to rise, some by 3 – 10 times, and some by 30 – 40 times, which seriously affected the orderly production and healthy development of the industry.’
In August a task force set out to find why overall auto related chip prices had increased by 10% -15%, with some individual chips increasing as much as 50% and when it was discovered that three chip distributors had purchased certain chips at 10 yuan ($1.55) and sold them at more than 400 yuan ($62.14), with a standard markup being between 7% and 10%, a full investigation was held and each of the three distributors was fined 2.5m yuan ($338,373 US), and were put on a watch list that will continue to be monitored by the state. Milton Friedman said,” What is greed? Of course, none of us are greedy, it’s only the other fellow who’s greedy. The world runs on individuals pursuing their separate interests”, but it was better said by Veruca in Charlie & the Chocolate Factory, “I want an Oompa-Loompa! I want you to get me an Oompa Loompa right away!”
It seems that three Chinese electronics distributors took advantage of the supply/demand imbalance facing vehicle manufacturers, particularly when foundries were also facing COVID-19 staffing issues, earthquakes in Japan, and a blizzard in Texas that exacerbated the imbalance that foundries were already facing from increased semiconductor demand from increasing electric vehicle production. According to a briefing by the State Administration of Market Supervision, the shortage of chips, particularly those needed for electric vehicles, has reduced such vehicle production in China, and when tracing back the cause for such issues, it was found that the three chip distributors had ‘maliciously snapped up chips in China, hoarding them and driving up prices. Causing the prices of some chips to continue to rise, some by 3 – 10 times, and some by 30 – 40 times, which seriously affected the orderly production and healthy development of the industry.’
In August a task force set out to find why overall auto related chip prices had increased by 10% -15%, with some individual chips increasing as much as 50% and when it was discovered that three chip distributors had purchased certain chips at 10 yuan ($1.55) and sold them at more than 400 yuan ($62.14), with a standard markup being between 7% and 10%, a full investigation was held and each of the three distributors was fined 2.5m yuan ($338,373 US), and were put on a watch list that will continue to be monitored by the state. Milton Friedman said,” What is greed? Of course, none of us are greedy, it’s only the other fellow who’s greedy. The world runs on individuals pursuing their separate interests”, but it was better said by Veruca in Charlie & the Chocolate Factory, “I want an Oompa-Loompa! I want you to get me an Oompa Loompa right away!”
RSS Feed