Computer Chip Shortage to Last At Least Six Months
In a recent BBC interview, Cisco’s chief executive, Chuck Robbins, said the shortage, caused by increased demand and restricted production during the pandemic, is set to continue.
Robbins is the latest leader of a major company to give his two cents on when the global computer chip shortage may end, following the heads of Intel and the Taiwan Semiconductor Manufacturing Company (TSMC), who both said recently that the issue may last two more years.
TSMC is the world’s biggest contract manufacturer of computer chips and is spending $100bn to expand capacity over the next three years. This week TSMC’s founder, Morris Chang, asked the Taiwanese government to “keep hold of it tightly”, reasoning that the company is better positioned to make chips than the US or China, despite their government subsidies. Intel chief executive Pat Gelsinger countered, telling the BBC it was not “palatable” to have so many chips made in Asia.
Robbins, on the other hand, thinks, “It doesn’t necessarily matter where they’re made, as long as you have multiple sources”.
The issue stems from the beginning of the pandemic, when companies cut their orders for chips, expecting the demand to dwindle. As a result, suppliers also reduced their output. However, the opposite happened. The demand for consumer electronics rose, whilst the supply fell. Many companies fell into the trap, including car manufacturers who cut their demand for semiconductors, which then led chip makers to lower production.
“Right now, it is a big problem,” Robbins said, “because semiconductors go in virtually everything. We think we’ve got another six months to get through the short term. The providers are building out more capacity. And that’ll get better and better over the next 12 to 18 months”.
That is why Robbins said: “What we don’t want is to have consolidation where any of the risks that we may face could, frankly, result in the situation we’re seeing today, whether it’s weather-related disaster risks, whether it’s single point of failure risk, whether its geopolitical risks, whatever those are. We just need more options, I think, for where semiconductors are built.”
One company attempting to solve the computer chip shortage is Intel, which recently announced a $20bn plan to expand production, including the creation of two new plants in Arizona. Cisco itself is also expanding its capabilities, recently acquiring Acacia Communications for $4.5bn which designs computer chips among other products.
Robbins played down the possibility of Cisco stepping up to solve the shortage. “We’re not a semiconductor fab company, so it’s not a core competency for us to do that”, he said. “So we think that companies that play in this space are much better equipped, we’re working very closely with them”.
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