Chuck Robbins, chairman and CEO of networking behemoth Cisco, has predicted that the computer chip crisis will last for the rest of the year.
The chip shortage, which is now impacting the world’s largest semiconductor consumers in all markets, began in the fourth quarter of last year, according to reports.
The coronavirus pandemic exacerbated the chip scarcity. Many retailers initially reduced their orders for chips, assuming that demand would decline. But, due to economic problems, people postponed or abandoned transactions, causing manufacturers to decrease capacity.
During the pandemic, however, consumer electronics demand increased. However, by that time, pandemic-induced processing plant closures had effectively halted chip production.
Time needed to heal
Other factors intensified the difficulties even though the restrictions were relaxed. The extreme drought in Taiwan, which forced the country to drain water supply from many industrial areas, including one that is a semiconductor manufacturing centre, meant that demand for chips greatly outpaced supply, resulting in the current situation.
Robbins’ opinions are similar to those of Qualcomm’s current CEO and Micron’s, who all believe the situation will not improve until the end of 2021.
According to the Semiconductor Industry Association in the United States, East Asia accounts for around 75 percent of global production capacity, with Taiwan’s TSMC and South Korea’s Samsung dominating the market.
To address this imbalance, Pat Gelsinger, the current CEO of Intel, has announced plans to spend $20 billion in two new chip manufacturing facilities.
“The providers are building out more capacity. And that’ll get better and better over the next 12 to 18 months,” suggests Robbins.
However, in an unusual turn of events, the global semiconductor supply shortage is also affecting chip-making equipment manufacturers. According to recent estimates, wait times for specialist equipment have increased to as much as a year.
While the chip shortage seems to be a demand-and-supply crisis at first glance, it has caused bottlenecks in the production chain, which, as the result, has led to greater costs.