Chip Supply Still Flutters, Poses Quagmire Among Tech And Auto Giants

The global shortage of semiconductor chips is lasting more than expected. The crisis which was significantly exacerbated by the Covid-19 pandemic is now forcing tech and auto giants to even curtail production. 

Speaking to CNBC’s Techcheck, Intel CEO Pat Gelsinger highlighted that semiconductor heartaches may not end until 2024, as they’ve now hit equipment manufacturing. Manufacturing tools can’t be built without the chip capacity to build them, regardless of whether factories have acquired the chips they need.

“That’s part of the reason that we believe the overall semiconductor shortage will now drift into 2024, from our earlier estimates in 2023, just because the shortages have now hit equipment and some of those factory ramps will be more challenged,” said Gelsinger.

The demand for semiconductors is growing every day due to the rapid advancement in tech and tech products overall. As such, chipmakers including Intel have been ramping up their efforts to expand their portfolio. In Mid-March Intel announced plans of setting up a semiconductor plant in Germany and expanding further in Europe in the next decade. 

With such plans afoot, Pat remains optimistic and believes the company is better positioned. “We’ve really invested in those equipment relationships, but that will be tempering the build-out of capacity for us and everybody else, but we believe we’re positioned better than the rest of the industry,” added Gelsinger. 

On Thursday Apple released its quarterly revenue of  $97.3 billion which was a 9 per cent year-over-year increase. CEO Tim Cook in an earnings call, however, said that the constraints from chip shortage and COVID-19 pandemic have affected the company in the range of $4 billion – $8 billion adding that the company was “not immune” to supply chain challenges.

Elsewhere, the chip shortage continues to be a threat to automakers although they use less-advanced chips. Late last year, General Motors announced it would temporarily discontinue offering heated seats from much of its lineup as a response to the chip shortage. 

Since an end isn’t in sight yet, other automakers such as Volvo cars and  Volkswagen Group recently announced that the chip shortage is still a challenge. 

Volkswagen Group anticipates a longer shortage of semiconductors than expected. “We see a structural undersupply in 2022, which is only likely to ease somewhat in the third or fourth quarter,” said the automaker’s finance chief Arno Antlitz. “The situation should improve in 2023, but the structural problem will not yet have been fully resolved,” he added.