Today, chips are in everything from game consoles and toothbrushes to washing machines and alarm clocks. However, the world is facing a serious chip crisis, showing no signs of stopping. Glenn O’Donnell, vice president of research at consulting firm Forrester, believes the situation will last until 2023 due to high demand and continued supply stress. He forecast personal computer demand will decline slightly next year, while data centers will buy more chips. According to him, combined with the growth in cloud computing and mining, the demand for chips is going to explode. According to Patrick Armstrong, IT director of Plurimi Investment Managers, the chip crisis could last 18 months. There are too many products that require chips such as cars, phones, IoT… All connected to the Internet. The car industry is affected more than any other sector. Earlier this month, the world’s largest chipmaker TSMC said it could catch up with car demand in June. But Mr. Armstrong said that was too ambitious. Ford, BMW, and Volkswagen all stressed they had production bottlenecks and couldn’t buy enough chips needed to build cars. Research firm Gartner predicts the chip crisis will continue until 2021, not to mention chip prices also increase. Analyst Alan Priestley said the situation could improve for some sectors in the next six months, but there could also be a “chain effect” into 2022. The semiconductor industry is doing everything to increase productivity but need time. In fact, Intel announced to spend $ 20 billion for two new chip factories in Arizona, USA. According to Mr. Priestley, it will take two to three years for these plants to operate but it will meet future demand. Reinhard Ploss, CEO of German chip maker Infineon, said last week that it “clearly takes time” until supply and demand balance. According to Wenzhe Zhao, Credit Suisse’s director of global economics and strategy, the recent chip crisis has encouraged inventory stockpiling in the supply chain, leading to a widening supply-demand gap. Not much can be done to solve the current situation, he said, except to adjust orders, production schedules and prices. Du Lam (According to CNBC)

Family offices: practically unregulated

The advantage of a so-called family office in which investors manage their own assets is that they are practically not subject to any regulatory or disclosure requirements. This is different with other constructions such as hedge funds that do business with other people’s assets: They must be registered with the US Securities and Exchange Commission and report quarterly on the investments in their portfolio. They are also obliged to disclose data on the ownership structure, assets under management and contacts with banks. For wealthy private individuals, a family office is therefore an ideal opportunity to move billions away from the public and regulatory authorities and to do business that should not necessarily be known. Which super-rich would like their investments to be discussed in detail by a broader public? This is also the reason why very few details are known about Hwang’s bets. The trigger for the problems at Archegos was apparently the price development of the share of the US media company ViacomCBS. Credit Suisse and the Japanese bank Nomura were particularly hard hit. Competitors such as Morgan Stanley, Goldman Sachs, JP Morgan or Deutsche Bank, who also had business relationships with Archegos, were able to get themselves to safety in good time.

The warning ignored

For Hwang, the secretive nature of a family office is likely to have been a major factor, as he has repeatedly come into conflict with laws in his investor life. In 2012, the US Securities and Exchange Commission accused him of insider trading. Hwang had to pay $ 44 million to get this done. Hwang has learned a painful lesson, he would be well advised to heed this warning, SEC Director Robert Khuzami advised him in the Securities and Exchange Commission notice. Khuzami’s warning went unheeded: In 2014, a court in Hong Kong banned him from trading stocks there for four years after Hwang admitted using inside information when trading Chinese bank stocks. In 2013 he founded his family initiative Archegos Capital.

Family offices are becoming increasingly popular

Family offices are playing a growing role as actors in the financial markets. Of course, many wealthy families do not want to increase their capital in extremely risky ways – and in the process get shipwrecked like Hwang. The aim is to manage the capital for years to come and generate returns. Most family offices are interested in long-term investments, as a study by the Insead business school found. A 2019 study by analyst firm Campden Research said they managed roughly $ 6 trillion in assets worldwide. In 2020, the family office of the Walton family, the founding family of retailer Walmart, was at the top with more than $ 160 billion in assets under management. According to estimates by the consulting firm EY, there are currently around 10,000 family offices around the world. The trend has been increasing for years. Most family offices have been created in the past 20 years, according to Insead. According to the experts at the consulting firm KPMG, one reason for the popularity is simply the fact that there are more and more wealthy families.

Where were the regulators?

The collapse of Archegos could now bring the issue of regulation of family offices on the agenda: The massive transactions and losses would raise questions that affect the banks and their relationship with Archegos, commented the Democratic US Senator Sherrod Brown on the incidents. The treatment of family offices should also be questioned. The “Financial Times” quotes Mark Sobel, chairman of the US think tank OMFIF, a longstanding and high-ranking employee in the US Treasury. He agrees with Brown: Archegos raise fundamental questions about the suitability of banks’ risk management. The regulatory perspective on the interactions between banks and non-banks should also be examined – to which, as we have seen, family offices have long belonged as powerful players in the financial markets. ECB director Isabel Schnabel told “Spiegel” that the collapse shows that there are significant regulatory gaps in funds. “Fortunately, it has only been a single fund so far. Nevertheless, this is a warning signal that there are considerable systemic risks here that need to be better regulated.” So why do banks provide at least a seedy figure like Hwang with credit billions that he can gamble away on dubious bets? And why doesn’t a supervisory authority know anything about it? Questions that should be answered quickly.