Chip shortage could last beyond 2022, Intel chief says

By The Washington Post Time of article published Apr 14, 2021

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By Jeanne Whalen

The global semiconductor shortage hammering the auto industry and other manufacturers is going to take "a couple of years" to abate, as demand soars alongside limited manufacturing capacity, the chief executive of chip-making giant Intel said.

Semiconductor companies can take some short-term steps to alleviate some of the pain, Pat Gelsinger said in an interview, adding that Intel aims to boost production of automotive chips within six to nine months. But an overall solution to the problem will take much longer, he said.

"We do believe we have the ability to help," said Gelsinger, who recently took over as CEO of the United States' largest semiconductor company by revenue. But "I think this is a couple of years until you are totally able to address it," he said. "It just takes a couple of years to build capacity."

The computer-chip supply crunch, fueled by pandemic supply-chain gyrations and soaring demand, has most visibly hurt automakers, forcing them to temporarily idle factories. But it's also affecting a wide variety of manufacturers, Gelsinger said, including manufacturers of personal computers and other equipment.

Gelsinger spoke with The Post after attending a virtual White House meeting Monday to address the problem. He said at that meeting, medical equipment suppliers worried aloud about a lack of semiconductors.

Intel has been talking to automakers and auto-parts suppliers about steps it can take to ramp up automotive chip production in the coming months, Gelsinger said, confirming details reported earlier by Reuters. Intel is aiming to start delivering that extra supply in six to nine months, he said.

"That in no way addresses all of it, but every little bit helps. We can help alleviate some pressure," said Gelsinger, an electrical engineer who earlier in his career spent 30 years at Intel, helping design and introduce several new microprocessors.

General Motors and Ford last week announced plans to temporarily idle several North American auto factories over the supply problems, although GM on Tuesday scrapped a few of its shutdown plans, saying that a factory in Spring Hill, Tenn., would reopen earlier than planned and that a plant in Mexico wouldn't require idling.

"GM's supply chain organization has made strides working with our supply base to mitigate the near-term impacts of the semiconductor situation" on those factories, spokesman David Barnas said in a statement.

One problem complicating supply at the moment: manufacturers are placing chip orders with multiple factories because they aren't sure which orders will come through, said Willy Shih, a Harvard Business School professor who specializes in technology and manufacturing.

"Imagine you're an automaker and you want more of a chip and you are being quoted a lead time of a year. How many are you going to order? Are you going to order from multiple sources? You betcha," Shih said.

The chaotic ordering is making it harder for chip makers to understand where they need to allocate supply to meet real, short-term needs, he said.

To ensure more domestic chip supply in the long term, the Biden administration is proposing spending $50 billion to subsidize semiconductor manufacturing facilities, an idea that has broad bipartisan support.

Last week, an auto-industry trade association proposed that a portion of that funding be dedicated to building manufacturing capacity for automotive chips.

"As you are well aware, as the nation's largest manufacturing sector, the auto industry contributes $1.1 trillion to the United States economy and represents 5.5 percent of the country's GDP," the Alliance for Automotive Innovation said in an April 5 letter to the Department of Commerce.

Automakers promoted that idea again at the White House's virtual meeting but met resistance from other industry chiefs who didn't want any sector to receive preferential treatment, Gelsinger said.

"Generally the others on the call said, boy, that's not a good policy way to address this," he said.

Gelsinger and another semiconductor chief - Tom Caulfield of GlobalFoundries, headquartered in Santa Clara, Calif. - said they lobbied at the meeting for the United States to set an aggressive goal for expanding domestic chip manufacturing. About 12% of the world's semiconductors currently are made in the United States. Caulfield said he called for a doubling of that market share, while Gelsinger said he lobbied to push it above 30%.

"A lot of the discussion was, let's not waste this crisis. Let's take the lessons learned - we should have more manufacturing in this country," Caulfield said in an interview.

Meeting such ambitious targets would require government funding beyond the $50 billion currently proposed, and much more investment from industry, Gelsinger said. Intel last month announced it will spend $20 billion to build two new factories in Arizona, as part of its strategy to begin producing chips designed by companies other than Intel.

The U.S. semiconductor industry argues that the federal government needs to offer more subsidies to compete with Asian nations, which have offered companies large financial incentives to build chip-manufacturing capacity.

Shih, the Harvard professor, said subsidies can be wasteful, and noted that some of the world's biggest chip manufacturers, including Taiwan's TSMC and South Korea's Samsung, have spent many billions of their own money over many years on manufacturing capacity.

The Washington Post

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