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Semiconductor Chip Shortage: It May Take a Couple of Years for Supply to Catch Up
Technology is being adopted in the manufacture of all types of products from automotive to everyday household products. But as demand increases, the supply of chips needed to build high-tech products is growing scarce. There is now a semiconductor chip shortage, especially for lower-end less-advanced chips.
One of many factors driving the problem are Chinese companies that fear US sanctions might ratchet up to be even tighter in the near future on China, causing them to to stockpile chips. Eric Xu, deputy chairman at Huawei, said that “Chinese companies are stockpiling for one month, three months, or even six months, and they have disrupted the whole system.”
Some other explanations for the cause of the chip shortage from The Motley Fool:
- Intel production problems with 10nm and 7nm chips
- Slow PC demand in 2019 and 2020 let memory chip producers to scale back production.
- Production, logistic and shipping problems during pandemic caused chip pipeline to shrink.
- Rapid growth of chip-dependent technology like the cloud, 5G, and Artificial Intelligence is growing the demand for chips.
- Dependence on non-US chipmakers like Taiwan’s TSMC, South Korea’s Samsung, and Dutch ASML where there have been some production problems.
Semiconductor companies aren’t sure how to respond. There has been talk of huge investments. TSMC announced that it expects to spend $100 billion to increase chip capacity over the next three years. But chip makers worry that the surge in demand may be only temporary and that demand may not be as high once the investment expansion is complete. But Kurt Sievers, CEO at NXP, said that “this is a lasting growth cycle, not a short spike.”
Pat Gelsinger, CEO at Intel, said that “we do believe we have the ability to help. But I think this is a couple of years until you are totally able to address it. It just takes a couple of years to build capacity.”
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