Case scenario for derivative contract

For this scenario we have two sides, Semi-conductor and Microchip suppliers, and the other side
is electronic devices manufacturers and producers. Semi-conductors and microchips are used in
all electronic devices including laptops. Phones, and even cars. As a result of this high demand,
there has been a huge shortage of microchips for the past two years, with fluctuating supply in
both directions. In this case the electronic device manufacturers have to undertake a big risk
when dealing with microchips supply, a shortage means continuously increasing prices and long
wait times. On the other hand, microchip suppliers can’t guarantee the fluctuations will always
be in their favor. For this case the best way to hedge risks is a Forward Derivative contract.