Monday, May 31st 2021

Intel CEO Predicts Chip Shortages Across the Ecosystem to Run Another Couple of Years

Intel CEO Pat Gelsinger, speaking at the company's 2021 Computex Opening Keynote address stated that the explosive demand for chips caused by recent inflections of technology, accelerated by the COVID-19 pandemic, has resulted in demand outstripping supply by such extent, that it could "still take a couple of years for the ecosystem to address the shortages."

Gelsinger detailed how the world of information technology is at its biggest crossroads ever, with the emergence of Cloud, 5G, AI, and smarter edge computing changing the way people work, learn, and interact. This has caused a huge growth in the demand for semiconductors straining technology supply chains around the world. Gelsinger stated that his company is working with partners across the technology ecosystem to increase output to meet demand. He detailed how Intel has nearly doubled its own chip wafer manufacturing capacity over the past four years. "But while the industry has taken steps to address near-term constraints, it could still take a couple of years for the ecosystem to address chip shortages of foundry capacity, substrate, and components.
Gelsinger called for the entire semiconductor industry to "rise to the occasion, and ensure that no individual bottlenecks limit growth for the industry; whether it's Wi-Fi modules, substrates, panels, or any other critical component." He warned that lack of supply "constraints" the growth we need to refuel the world economy. Intel, Gelsinger stated, is driving a collaborative approach to help up and down the supply chain, not just with Intel's own suppliers, but also their upstream suppliers. He cited the example of Intel working with suppliers at every level to ramp up production of substrate for chips at the company's Vietnam facility, resulting in improvement of supply by "millions of units" by 2021. He then went on to refresh the company's Integrated Device Manufacturing (IDM) 2.0 strategy, where the company micromanages every link in the supply chain, to respond to the dynamic market.

Gelsinger's comments are extremely telling, even if it's worded to be generalized (not specific to Intel). It means that along with most of the industry, Intel is running behind the demand-supply curve, and expects at least "a couple of years" to restore normalcy in supply. As a semiconductor giant, and America's largest chip manufacturer, Intel CEO's analysis is expected to carry weight, as the company likely has the some of the best competitive analysts and market researchers to go with their supplier program.

Demand is only one half of the problem, the other is the COVID-19 pandemic itself, which has hit supply chains around the world. The semiconductor industry isn't immune, with Taiwan's TSMC recently reporting COVID-19 cases among its workforce, as the island braves a brutal spike in COVID-19 infection rates, crippling the country's public-health infrastructure. TSMC is careful not to scare its enviable clientele that includes Apple, Qualcomm, and AMD; but the infection rates of Taiwan are expected to eventually catch up with TSMC, despite its best efforts to detect and isolate infected employees.
Source: Intel Computex Opening Keynote (YouTube)
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18 Comments on Intel CEO Predicts Chip Shortages Across the Ecosystem to Run Another Couple of Years

#1
The Quim Reaper
It will be fascinating to see how this current situation is viewed and written about, in say 5-10yrs time, with the benefit of hindsight...Unless of course Covid mutates into the Zombie Apocalypse virus, then we'll all have much more serious matters to be dealing with... :)
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#2
Verpal
The Quim ReaperIt will be fascinating to see how this current situation is viewed and written about, in say 5-10yrs time, with the benefit of hindsight...Unless of course Covid mutates into the Zombie Apocalypse virus, then we'll all have much more serious matters to be dealing with... :)
I prefer zombie apocalypse virus, at least zombie virus will be wiped out extremely quickly in real world, and probably have less death attributed to it.
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#3
Solaris17
Dainty Moderator
I can't imagine people still didn't know or didn't expect this already.
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#4
64K
A few years before anything approaching what used to be normal is what I've been thinking for quite a while now. Fabs are being built to address the shortages but they take years to build and go online. If Covid-19 can be dealt with successfully then transportation will be much better and people can go back to work as normal.
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#5
Testsubject01
64KA few years before anything approaching what used to be normal is what I've been thinking for quite a while now. Fabs are being built to address the shortages but they take years to build and go online. If Covid-19 can be dealt with successfully then transportation will be much better and people can go back to work as normal.
Also, none of the big chip manufactures has much incentive to hurry back to a completive market anytime soon. Everything gets sold right out the door, they are making record profits across the board. :(
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#6
RealKGB
I didn't come up with this, but:
Hot take: The chip shortage was partly planned.

I've seen numerous people say that TSMC anticipated that they'd need to expand capacity. Only makes sense, as more and more things have chips in them. Yet, they waited until the last minute to start building new fabs. It doesn't take a rocket scientist to see that electronics are in more and more every day things, and that we will need more chips.

It wouldn't surprise me if they waited until there would be a large increase in demand they couldn't fulfill, they raise the prices on their chips, and use the additional profit to offset the cost of building out new fab space.
Credit to dizmo on the LTT forums.

Any thoughts? To me, seems plausible (and like something I'd do).
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#7
R-T-B
RealKGBI didn't come up with this, but:

Credit to dizmo on the LTT forums.

Any thoughts? To me, seems plausible (and like something I'd do).
Taiwan is suffering a decidedly unplanned drought that is affecting silicon production in a massive way.

Even if they did do the above, that's not the issue here.
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#8
chrcoluk
RealKGBI didn't come up with this, but:

Credit to dizmo on the LTT forums.

Any thoughts? To me, seems plausible (and like something I'd do).
I would say its very likely, I remember posting this theory somewhere but got shot down, but we can see since the HDD flood event, manufacturers have learnt shortages can increase profits.

Also having worked in manufacturing I know first hand that manufacturers do not like building new factories, it is seen as high risk, instead there is a tendency to increase prices as capacity draws closer, and only then if that doesn't stem demand a decision to expand might be carried out.
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#9
R-T-B
I mean the idea of not scaling to meet demand in advance isn't really conspiracy material... that's more a given.
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#10
AnarchoPrimitiv
I'll be interested to read the any peer-reviewed papers in a few years that can outline the cause of the shortage in detail.... People staying home from thr pandemic and buying new gaming and home office PCs really couldn't have done this much, could they?
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#11
neatfeatguy
AnarchoPrimitivI'll be interested to read the any peer-reviewed papers in a few years that can outline the cause of the shortage in detail.... People staying home from thr pandemic and buying new gaming and home office PCs really couldn't have done this much, could they?
The governments caused this.
  1. Force closing of most production due to lock downs.
  2. Production slows to a crawl or outright stops for a period of time.
  3. With production down to almost nothing and folks still buying, there is nothing to replenish inventories after the stocked surplus is used.
  4. Now you mix in stupid shit such as asshats undercutting retailers and buying up large quantities of stock directly, then they shift to utilizing inventory for their personal needs (such as cryptomining, as an example) or they see inventory is low and demand is high, scalp products to turn a massive profit.
  5. Manufacturing starts back up, but it's not an instant flow of products. It takes time to get things going again. By now everything is 6 months+ behind and when inventory gets out the manufacturer's doors there are so many people wanting products that a lot of people resort to #4.
  6. Eventually some material does make it to retailers, but due to the demand a lot of people resort to #4
  7. A lot of normal day people never get a chance to buying something new and resort to buying from folks that resort to #4
  8. see #4
  9. see #4
  10. see #4
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#12
evernessince
neatfeatguyThe governments caused this.
  1. Force closing of most production due to lock downs.
  2. Production slows to a crawl or outright stops for a period of time.
  3. With production down to almost nothing and folks still buying, there is nothing to replenish inventories after the stocked surplus is used.
  4. Now you mix in stupid shit such as asshats undercutting retailers and buying up large quantities of stock directly, then they shift to utilizing inventory for their personal needs (such as cryptomining, as an example) or they see inventory is low and demand is high, scalp products to turn a massive profit.
  5. Manufacturing starts back up, but it's not an instant flow of products. It takes time to get things going again. By now everything is 6 months+ behind and when inventory gets out the manufacturer's doors there are so many people wanting products that a lot of people resort to #4.
  6. Eventually some material does make it to retailers, but due to the demand a lot of people resort to #4
  7. A lot of normal day people never get a chance to buying something new and resort to buying from folks that resort to #4
  8. see #4
  9. see #4
  10. see #4
Right, it makes a lot more sense to just let the pandemic kill the peasants on the line.
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#13
Why_Me
evernessinceRight, it makes a lot more sense to just let the pandemic kill the peasants on the line.
The virus cured the flu so there's always that.
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#14
R-T-B
Why_MeThe virus cured the flu so there's always that.
Social distancing is what killed the flu. And it will certainly be back the moment we stop.
AnarchoPrimitivPeople staying home from thr pandemic and buying new gaming and home office PCs really couldn't have done this much, could they?
Abso-frickin-utely.
Posted on Reply
#15
Why_Me
R-T-BSocial distancing is what killed the flu. And it will certainly be back the moment we stop.


Abso-frickin-utely.
Social distancing killed the flu but not the virus?
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#16
Testsubject01
R-T-B
AnarchoPrimitivI'll be interested to read the any peer-reviewed papers in a few years that can outline the cause of the shortage in detail.... People staying home from thr pandemic and buying new gaming and home office PCs really couldn't have done this much, could they?
Abso-frickin-utely.
Can we kindly please stop this narrative?

No, it was not just DIY and OEM demand for home entertainment and gaming.
Not just countless enterprises sourcing office PCs and workstations to get home office setups going.
Not just IT departments & companies looking to beef up their infrastructure or setting up whole new networks.
Not just crypto taking off again on GPUs and recently on storage hardware as well.
Not just manufacturers, distributors and retailers trying to abuse a stricken market for maximum profits.
Not just scalpers to discover pc hardware as a lucrative addition to their portfolio.
Not "just" a global pandemic reducing production output and disrupting large sectors of the economy, which rely on "on demand delivery" to not bock down in no time.

Given all the news of past months, it certainly looks like an amalgamation of all the above (and most likely some more) to create the mess we currently reside in.
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#17
neatfeatguy
evernessinceRight, it makes a lot more sense to just let the pandemic kill the peasants on the line.
Regardless of what you think and what is going on, it was the governments that caused it.

You could say the pandemic was a result of the governments' actions, but it was the governments that utterly caused the situation.
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#18
R-T-B
Why_MeSocial distancing killed the flu but not the virus.
"Killed" is generous but yes as the flu is far less infectious.
Testsubject01No, it was not just DIY and OEM demand for home entertainment and gaming.
I never said it was "just."

But that alone was enough. You stop global production, you increase demand, stuff runs out.
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