Chip shortage will last beyond 2022 as demand far outstrips supply, Intel chief says

We do believe we have the ability to help, said Gelsinger, who recently took over as CEO of the United States largest-by-revenue semiconductor company. 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 its affecting a variety of businesses, Gelsinger said, including manufacturers of personal computers and other equipment.

Gelsinger spoke with The Washington Post after attending a virtual White House meeting on Monday to address the problem. At that meeting, he said, 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 increase 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 to design and introduce several microprocessors.

General Motors and Ford last week announced plans to temporarily idle several North American 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 would keep operating.

GMs 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 arent sure which orders will come through, said Willy Shih, a Harvard Business School professor who specializes in technology and manufacturing.

Imagine youre 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 bet [you are], Shih said.

The chaotic ordering is making it harder for chipmakers 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 nations largest manufacturing sector, the auto industry contributes $1.1 trillion to the United States economy and represents 5.5 percent of the countrys GDP, the Alliance for Automotive Innovation said in an April 5 letter to the Commerce Department.

Automakers promoted that idea again at the White Houses virtual meeting but met resistance from other industry chiefs who didnt want any sector to receive preferential treatment, Gelsinger said.

Generally, the others on the call said, boy, thats 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 percent of the worlds semiconductors 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 percent.

A lot of the discussion was, lets not waste this crisis. Lets 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 that it will spend $20 billion to build two 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 provide more subsidies to compete with Asian nations, which have offered chipmakers large financial incentives to build manufacturing capacity.

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



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