Intel CEO says chip shortage will continue throughout this year

As many of you know, we are in the middle of a chip shortage that has been impacting automobile and consumer electronic manufacturers. Bloomberg reports that Intel CEO Pat Gelsinger sees the shortage continuing throughout the remainder of this year, bottoming out during the second half of 2021 before things start to improve. In fact, the executive doesn't expect the supply-demand picture to return to normal until 2023.

Gelsinger said, "I don’t expect the chip industry is back to a healthy supply-demand situation until ’23. For a variety of industries, I think it’s still getting worse before it gets better." Last month, we told you that the lead time, the time it takes between placing an order for semiconductors and actually receiving them, hit 17 weeks in April; that was the longest lead time recorded by Susquehanna Financial since 2017 and was a big jump compared to the previous year's 12.53 figure.

Unlike fabless manufacturers like Apple, Qualcomm, MediaTek and others, Intel owns its own factories (aka fabs, short for fabrication plants). A company like Apple designs its own chips, but without the means to manufacture them itself, the company turns to the world's largest contract foundry, Taiwan Semiconductor Manufacturing Company, Limited (TSMC Ltd.) to produce them.

Gelsinger says that thanks to Intel's ownership of its fabs, it is more able to keep up with demand for chips than those who are outsourcing production to another foundry. The executive says that demand for chips will continue to be strong over the next 10 years thanks to expected growth in demand for 5G smartphones, AI, and electric vehicles. Intel's CEO is on the side of those industry executives who see the current demand for chips continuing into the future.

Other executives don't believe that the industry can sustain growth of more than 5% on an annual basis. Broadcom Inc. CEO Hock Tan is one such executive. Even though his firm reported a 15% revenue hike for its latest quarter, Tan says chip production is a mature industry that will revert back to low growth.

There is no denying though, how important chips are to the global economy. The U.S. leads the way in the sales and design of chips although production is led by Taiwan's TSMC and South Korea's Samsung. TSMC will be opening at least one fab in Arizona no later than 2024.