The world's largest chipmaker has dropped a bombshell, warning of imminent price rises. This is not just a corporate inconvenience. It is a stark reminder of the UK's reckless reliance on foreign supply chains for the components that power everything from iPhones to fighter jets.
For years, the City has turned a blind eye to this vulnerability, blinded by the efficiency of global markets. Now, the bill is coming due. The chipmaker's warning signals a fundamental shift in the cost base for UK industry.
Inflation, already sticky, will get another upward shove. Gilt yields, which have been dancing on a knife's edge, may well spike as the market prices in higher import costs. This is a classic supply-side shock by another name.
The government, ever eager to spend, will be tempted to throw subsidies at domestic chip production. But that is a long-term fix, if it works at all. In the short term, the only sensible response is to let prices adjust and accept that the era of cheap silicon is over.
Capital will flee from sectors most exposed to chip costs, such as automotive and consumer electronics. Investors should brace for turbulence. The bottom line is undeniable: the UK’s tech sector is built on sand, not silicon.
And the tide is going out.
