Behind this chip shortage, Huaqiangbei has made a lot of money.

Huaqiangbei has never been short of business.  
Since the chip shortage began in 2020, chip prices have generally increased by 5 to 10 times, with the unit price of some chips rising to thousands or tens of thousands of yuan, or even being priced but not available.  
Industries that have demand for chips, such as automobiles, consumer electronics, and medical care, are in urgent need. Home appliance prices are rising, graphics cards are hard to find, and there are frequent reports of car manufacturers cutting production.  
As the forefront of the national—and even global—consumer electronics market, Shenzhen Huaqiangbei brings together industry elites from all over the country. They have the sharpest business sense, the fastest market response, and the most vicious timing and courage to take action.  
Amid the protracted global "chip shortage" craze caused by the outbreak of the epidemic, chip reselling has become the most profitable business.  
In the Huaqiangbei Integrated Circuit and Semiconductor Components Market, the buildings are large or small single rooms, and the smallest shop front is less than 1 meter wide. Among them, there is a chip dealer who bought a house in Shenzhen with the money earned from one business; there is a sales specialist born in the 1990s who chose to resign in March this year and work alone, earning tens of millions of yuan in less than half a year; there is also a sales specialist who graduated from a college, and his salary soared from a few thousand yuan to 300,000 yuan.  
The Huaqiangbei Market, a mixed market, staged highly dramatic scenes: Some people imported full containers of "blind boxes" from overseas in an attempt to separate usable chips for sale; some people smuggled chips on speedboats and shuttled between the docks of Shenzhen and Hong Kong; some consumer electronics companies were even forced to sell their raw materials because they couldn't buy all the parts for their products, but they accidentally made a fortune...
 

Interior pictures of SEG Building

   

01

In Huaqiangbei, don’t shop around.
 
Ever since the first batch of workers resumed work after the epidemic, chip shortages have existed. In the past two years, many chips from major international brands such as Texas Instruments, STMicroelectronics, Infineon, and NXP have been in short supply. Even qualified agents have found it difficult to find relevant chips.  
But in Huaqiangbei Market, you can buy everything.  
 

Tower A, Huaqiangbei Electronic World

In the chip distribution system, the original chip manufacturer will hand over the chips to agents for sale worldwide. Well-known chip companies often choose to cooperate with world-renowned agency companies such as Arrow, Avnet, and Dalian. Small and medium-sized dealers in Huaqiangbei do not have this qualification. They can only obtain agency rights for a small number of foreign niche brands, and some chip original manufacturers prohibit agents from selling chips to dealers in Huaqiangbei.  
The reality is that Huaqiangbei has a large number of chips from original manufacturers.  
According to an internal iResearch report, TI, ST, Infineon and NXP are currently most out of stock. Among them, MCU (single-chip microcomputer, an integrated chip integrating processor, memory and other functions), power management chip (controlling the power switch), CPU/GPU (processor), display/driver chip (display screen), MOSFET (amplification circuit or switching circuit) and memory chip (storage data) are difficult to buy, and everything from the main control chip to peripheral chips is seriously out of stock.  
When 36 Krypton consulted the spot dealers at the Huaqiangbei store about the most scarce chips currently on the market, a young man from the Huaqiang North Market told 36 Krypton, "What kind of products do you want? Just add WeChat and I will help you find it."  
  The storefront of SEG Electronics Building, Huaqiang Electronics Market and SEG Electronics Building all belong to Huaqiang North Market
Another diode spot dealer in Huaqiangbei kindly advised, "In Huaqiangbei, don't shop around. The clearer you know, the greater the price you will pay."  
——There is an unwritten rule among Huaqiangbei dealers. The more people ask, the higher the quotation will be.  
Zeng Yuan, a trader in Huaqiangbei, told 36Kr that the more people in the market ask about this chip, the more dealers will feel the heat. The last quote to the inquirer may be 10 yuan, and the next one will increase to 20 yuan or 40 yuan.  
Therefore, Huaqiangbei’s quotations for scarce chips are getting higher and higher, such as ST The 003 chip only rose to 3 yuan during the chip shortage craze in 2018, but has risen to 10 yuan this year; the unit price of a certain NXP chip has increased from 10 yuan to 300 yuan; TI's 947 chip has even increased from 20 or 30 yuan to more than 1,000 yuan; even some brands of diodes and transistors have increased from 2 or 3 yuan to 5 or 6 yuan.  
In Huaqiangbei, certain types of chips are usually concentrated in the hands of a group of familiar people, which facilitates their price speculation. After some dealers make money, they will recruit relatives and friends to join the industry, and they have a close relationship; some people sell the same brand of chips and often buy goods together, because agents usually start shipping 500,000 chips (500K), and the price of a batch of chips ranges from tens to hundreds of millions of yuan. It is difficult for one dealer to eat a whole batch of goods.  
When there is a shortage in the market, spot dealers who have similar chips will get together and form a WeChat group to unify the chip prices for the next day in the group every day. For example, "Tomorrow we will quote a uniform price of 50 yuan, and don't sell it if it is less than 50 yuan." This will raise the price of chip products.  
Under this model, even if there is no shortage of chips, the price will be driven up.  
Even if the shortage of production capacity in upstream fabs is alleviated and the pace of shipments is restored, new goods flowing to the market will still reach these people due to the network of relationships. For example, 36 Krypton has seen that dealers’ WeChat can receive model information of currently available chips every day, including TI 947 chips that have increased from 20 yuan to more than 1,000 yuan, and the purchase price is 10 profit points lower than the market price.  
Trader Wang Hong told 36Kr, “As long as the supply of upstream raw materials for chips has not been restored, or there is a natural disaster in the factory, and the delivery cycle announced on the official website has been extended, dealers will automatically stock up and speculate on prices. At present, the delivery time of some models of imported chips has changed from 8-10 weeks to 52 weeks, or even longer.”
  The circle of friends of Huaqiangbei IC people was once flooded with a "magic picture" complaining about the 54-week delivery date of Microchip chips.
In addition, once a dealer discovers that it is the only one with a certain type of chip in stock on the market, it will immediately stop shipping and stock up, waiting to sell the chip at a good price.  
There are even tools on the market specifically designed to help dealers determine inventory. On the day of the interview, Wang Hong was looking for goods for a customer. He found the source of the goods from a Huaqiangbei spot dealer. At that time, the spot dealer quoted tens of dollars, which was already a high number. However, when the spot dealer found that he was the only one in the market who still had this kind of chip, he immediately changed his story and said "it is out of stock", and then sold it to the outside world at a higher price a few days later.  
Stock up on rare items, only rare ones can sell for better prices.  
Huaqiangbei Semiconductor Spot Dealers, which caught up with this wave of chip shortages, quickly accumulated a large amount of assets, and there were many examples of overnight wealth.  
After the price of TI chips increased from dozens to 10,000 yuan per piece, a spot dealer who stocked 2,000 of the chips suddenly went from owning a bunch of unsold chips to owning 20 million in assets. After selling these chips, he used cash to buy a house near Lixiang Park in Shenzhen;
A procurement specialist born in 1997 who likes to study big data only resigned in March 2021. In less than half a year, he has earned millions single-handedly;
There are also post-90s bosses who have been working in Huaqiangbei since they were teenagers. In the first half of 2021, they earned tens of millions and bought cars, houses, and offices in Shenzhen...
Zeng Yuan told 36 Krypton that because sales commissions are charged based on sales, even their company’s salesmen who graduated from college and earned several thousand monthly salaries generally have a monthly salary of more than 100,000 yuan recently, and some can even earn 200,000 to 300,000 yuan.  
Now, what Zeng Yuan is most worried about is that once his associates have mastered the information source and completed the accumulation of wealth, they may go out to work alone in the future.  
 

Huaqiangbei salesman delivers goods

Such stories have been repeated frequently in Huaqiangbei, stimulating more people to enter the venue. Those who have money can do it themselves; those who have no money, some use their houses as mortgage loans, some borrow money from their fathers who are doing business to stock up on goods, and some look for outside investment.  
For example, a pair of sisters born in the 1980s in Huaqiangbei have strong personal abilities and a large number of customers, but they have no money, so they sought investment from an oil tycoon from their hometown in Chaoshan. Without spending a penny, the sisters can not only receive dividends from the business, but also receive commission bonuses on sales.  
Su Zhe, a person in the semiconductor industry, told 36Kr that in September last year, several of his friends pooled together 3 million to go to Shenzhen to stock up on goods, and have now earned more than 10 million.  
The entire Huaqiangbei is shrouded in a layer of wealth. There are stories of getting rich overnight, dramatic twists, and passwords that reveal the reasons for the crazy price increase of chips.
 

Continued below: In 2021, I sold chips in Shenzhen and earned tens of millions in half a year (2)

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