Intel says chip shortage will persist for 'couple of years'

Automotive Industry

Source: Automotive News Europe, 2021-05-02

The global semiconductor shortage roiling a wide range of industries likely will not be resolved for a few more years, according to Intel's new CEO Pat Gelsinger.

The company is reworking some of its factories to increase production and address the chip shortage in the auto industry, he said in an interview with CBS News. It may take at least several months for the strain on supply to even begin easing, he added.

"We have a couple of years until we catch up to this surging demand across every aspect of the business," Gelsinger said.

Demand for semiconductors was boosted in 2020 as consumers scooped up home gadgets during the pandemic. But meeting that increase has been hard, thanks to shuttered plants, among other factors. Companies worldwide say they expect supply-chain constraints due to logistics backlogs and the chip shortage to continue for much of 2021.

The global crunch has catapulted semiconductor firms into the limelight and to the top of political agendas. The Biden Administration in April told companies vying with each other for semiconductors that he has bipartisan support for government funding to address the shortages.

Gelsinger said US dominance in the industry had dwindled so much that only 12% of the world’s semiconductor manufacturing is done in the country today, from 37% a quarter of a century ago. Intel is the only manufacturer of high-end, cutting edge chips, he told CBS.

“And anybody who looks at supply chain says, ‘That’s a problem,’” he said. “This is a big, critical industry and we want more of it on American soil: the jobs that we want in America, the control of our long-term technology future.”

He added that his company will not be “anywhere near as focused” on its share repurchase program as it’s been up to now.

It has forced the entire auto industry to cut output, with Ford announcing the shortage will likely reduce production by 1.1m vehicles in 2021. Jaguar Land Rover Automotive, Volvo Group and Mitsubishi Motors recently joined the growing list of manufacturers idling factories. Apple warned supply constraints are crimping sales of iPads and Macs.

Meanwhile, Mark Liu, Chairman of Taiwan Semiconductor Manufacturing, told CBS his company, having heard about shortages at the end of 2020, tried to “squeeze” out as many chips as possible for car companies.

“Today, we think we are two months ahead, that we can catch up (to) the minimum requirement of our customers -- by the end of June,” he said.   

The supply shortage may only be alleviated by the end of the year or early 2022, CBS said.

"There is a time lag," Liu said. "In car chips particularly, the supply chain is long and complex."

Liu also sought to ease concerns that US companies are relying on Asian suppliers, which account for 75% of manufacturing, according to CBS.

"This is not about Asia or not Asia, because a shortage will happen no matter where the production is located," he said. "Because it’s due to the COVID."

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