Speaking at the company’s inaugural Computex Show 2021 address, Intel CEO Pat Gelsinger stated that the massive demand for chips caused by the recent reversals of the technology, accelerated by the COVID-19 pandemic, has increased supply demand to such an extent, It could take the market two years to address the shortfall in supplies. Gelsinger detailed how the world of information technology has reached its biggest crossroads ever, with the rise of cloud services, 5G networks, artificial intelligence and smarter computing that have changed the way people work, learn and interact. This has caused an exponential growth in demand for semiconductors straining technology supply chains around the world.
Mr. Gelsinger also stated that his company is working with partners across the global technology ecosystem to increase production to meet demand for these components. He detailed how Intel had nearly doubled its chip-making capacity over the past four years to meet such growing demands. “But while the industry has taken steps to address the limitations in the near term, it could take two years for the industry’s integrative system to address chip shortages versus foundry and component manufacturing capacity,” he added. Based on these data, Gelsinger called on the entire semiconductor industry to rise to the occasion, and to ensure that there are no individual bottlenecks limiting the growth of the industry; Whether it’s Wi-Fi modules, necessary manufacturing components, panels, or any other critical component. He also warned that the supply shortage will further constrain the growth we need to supply the global economy with the fuel to move forward.
Attempts to remedy the situation
Gelsinger also mentioned that Intel leads a collaborative approach to helping up and down the supply chain, not only with Intel’s own suppliers, but also with its upstream suppliers. He cited the example of Intel working with suppliers at all levels to increase production of components for the chips the company will need at its new facility in Vietnam, optimizing supply by “millions of units” by 2021. He then went on to talk about the company’s new integrated hardware strategy, which he called (Integrated Device Manufacturing (IDM) 2.0 strategy), where the company manages each link in the supply chain in detail, to respond to the industry’s changing dynamic market.
In fact, Geisinger’s comments were very telling, even if they were meant to be generalized (as it was general advice and not just Intel). This means that, along with most of the industry, Intel is operating behind the supply and demand curve, expecting at least a “few years” to restore supply normalcy. As a semiconductor giant, and America’s largest chip maker, the CEO’s analysis is expected to carry weight, as the company will likely have some of the best competitive analysts and market researchers to work with their supplier program.
It’s not the only problem
In fact, demand is only half the problem, as the other problem is the COVID-19 pandemic itself, which is hurting supply chains around the world. As we know, the semiconductor industry is not immune, as Taiwan’s TSMC recently reported cases of COVID-19 among its workforce which we discussed in a news item around yesterday, just as the island itself is defying a brutal rise in COVID-19 infection rates, which has led to paralyze the country’s public health infrastructure. Despite this confusing state of affairs in the country, TSMC has been careful not to intimidate its enviable customers such as Apple, Qualcomm and AMD; But infection rates in Taiwan are expected to eventually catch up with TSMC, despite its best efforts to detect and isolate infected employees.
There is no doubt that this low supply situation was not the result of day and night, but was the result of the accumulation of a combination of different factors. The problem of the virus and the damage of companies to the closure occurred, which affected the supply chains, and therefore the supply significantly for a good period of 2020. Then life returned to normal relatively, but with a lot of bans and thus the factories did not return to their full efficiency for a while as well. During these periods, the number of users of personal computers and technology in general increased, due to many resorting to working from home and sitting longer periods in it. Therefore, the supply has increased from the normal rate and the demand has decreased from the usual rates. Although work has recently returned to normal, the current indications of virus activity may threaten to close again. Anyway, let’s see how things turn out.