Intel: Semiconductor Supply Chain Issues Could Last Years
The global semiconductor shortage which has crippled car manufacturers could continue on for several more years, according to Intel’s CEO Pat Gelsinger.
Chip scarcity has affected dozens of the global economy’s biggest industries. Automotive production lines have been halted - both traditional car manufacturers and EV brands, such as Tesla - Microsoft and Sony have faced a slow rollout of their latest video game consoles, and leading phone manufacturers including Samsung warned that the drought will impact their ability to launch new iterations of their flagship handsets.
Organisations have adapted their supply chains to meet the immediate shortfall says Gelsinger, but, speaking at a computer industry virtual trade show, said: “While the industry has taken steps to address near term constraints it could still take a couple of years for the ecosystem to address shortages of foundry capacity, substrates and components."
What caused the semiconductor shortage?
The global shortage in semiconductor chips is the result of compounding issues and shifts in demand due to the pandemic, rather than a sudden crushing blow.
During the height of the early pandemic in mid-2020, chip manufacturers pivoted to meet the growing demand of the work-from-home market, shifting production lines towards laptops and other communications devices millions relied upon for remote work. When the economy began to open back up, other sectors that relied on the chips found availability was scarce.
Other unforeseen factors have also taken their toll. Production at Japanese chip maker Renesas was set back after a fire swept through one of its fabrication sites. More than 20 manufacturing units were destroyed in the blaze, meaning production had to be moved to a new site while repairs took place and new equipment was procured. Renesas says capacity at the affected site returned to 88% by the end of May, and is expected to recover to pre-fire levels by the middle of June.
There are some winners from the semiconductor shortage
While this is bad news for supply chains and consumers, chip manufacturers have experienced a record year. The top 10 semiconductor plants saw quarterly revenue hit a new high of $22.75 billion in Q1 21, according to TrendForce analysts, who forecast further growth of between one and three per cent in the second quarter.
Top 5 chip foundries by revenue
Intel also announced in March that it will be ramping up its own manufacturing capacity, investing $20bn to build two new factories in Arizona, USA, to increase chip output. Gelsinger said the company was “all systems go” on production for chips for 2023.
Intel also plans to expand its manufacturing capabilities into Europe, as well as opening its manufacturing lines up to external customers, with a focus on ‘cutting-edge computing chip manufacturing’.
EU and US agree end to Airbus-Boeing supply chain tariffs
The EU and US have agreed to resolve a 17-year dispute over aircraft subsidies, suspending tariffs on billions of dollars' worth of goods that have plagued procurement leaders on both sides of the Atlantic.
Under an agreement reached by European Commission Executive Vice-President Valdis Dombrovskis and US Trade Representative Katherine Tai on Tuesday, the tariffs will be halted for a period of at least five years.
It will bring an end to punitive and disruptive levies on supply chains that have little to do with the argument, which became embroiled in the trade battle. Businesses on both sides of the dispute have been hit with more than $3.3bn in duties since they were first imposed by the US in October 2019, according the EC.
The US imposed charges on goods upto $7.5bn in response to a World Trade Organisation ruling that judged the EU’s support of Airbus, its biggest aircraft manufacturer, unlawful. A year later in November 2020, the EU hit back. The WTO found the US had violated trade rules in its favourable treatment of Boeing, and was hit with EU duties worth $4bn.
In all the tariffs affected $11.5bn worth of goods, including French cheese, Scotch whisky, aircraft and machinery in Europe, and sugarcane products, handbags and tobacco in America. Procurement leaders on both sides of the fence were forced to wrestle with tariffs of 15% on aircraft and components, and 25% on non-aircraft related products.
Boeing-Airbus dispute by the numbers
- The dispute began in 2004
- Tariffs suspended for 5 years
- $11.5bn worth of goods affected by tariffs
- $3.3bn in duties paid by businesses to date
- 15% levy on aircraft and 25% on non-aircraft goods suspended
Both sides welcome end to tariffs
European Commission President Ursula von der Leyen branded the truce a “major step” in ending what is the longest running dispute in WTO history. It began in 2004.
“I am happy to see that after intensive work between the European Commission and the US administration, our transatlantic partnership is on its way to reaching cruising speed. This shows the new spirit of cooperation between the EU and the US and that we can solve the other issues to our mutual benefit,” she added.
Both aircraft manufacturers have welcomed the news. Airbus said in a statement that it will hopefully bring to an end the “lose-lose tariffs” that are affecting industries already facing “many challenges”. Boeing added that it will “fully support the U.S. Government’s efforts to ensure that the principles in this understanding are respected”.
The US aerospace firm added: "The understanding reached today commits the EU to addressing launch aid, and leaves in place the necessary rules to ensure that the EU and United States live up to that commitment, without requiring further WTO action."
This week’s decision expands upon a short-term tariff truce announced in March this year. The EC says it will work closely with the US to try and further resolve the dispute, establishing a Working Group on Large Civil Aircraft led by each side’s trade minister.
Airbus last month signalled to suppliers that post-pandemic recovery was on the horizon, telling them to scale up to meet a return to pre-COVID manufacturing levels. “The aviation sector is beginning to recover from the COVID-19 crisis,” said Airbus chief executive Guillaume Faury, adding that suppliers should prepare for a period of intensive production “when market conditions call for it.”