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Intel CEO Pat Gelsinger believes that the two–year shortage of chips that’s limited output of products ranging from cars to advanced weapons will continue through 2024.
“Chip shortage — we’re about halfway through,” Gelsinger said in an interview with Yahoo Money on the sidelines of the World Economic Forum in Davos, Switzerland. “My expectation is that it persists through 2024.”
Gelsinger’s prediction extends by yet another year the earlier forecast of analysts surveyed last year by EE Times. Chipmakers, including Intel, Taiwan Semiconductor Manufacturing Co. (TSMC), and Samsung Electronics, have each announced investments this year worth tens of billions of dollars in locations around the world to catch up with demand that exceeded supply when the Covid outbreak started in 2020.
Demand for chips used in laptops, gaming devices, and data centers soared as more people worked and played from home during the pandemic. Now, chip equipment makers such as ASML and Applied Materials are unable to meet demand from chipmakers because they cannot buy enough semiconductors.
“The big issue we’ve faced over the last six to nine months is the equipment that goes into the fabs,” Gelsinger said. “Those equipment lead times have pushed out pretty substantially.”
The Ukraine war has also crimped supplies of key materials and equipment used to make chips, according to Samsung. Lead times for orders of chip tools are stretching out, according to the company.
ASML, the sole supplier of extreme ultraviolet lithography (EUV) equipment that chipmakers such as Intel, TSMC, and Samsung are counting on to extend Moore’s Law, said at the start of 2022 that it is unable to meet demand. Even so, ASML expects its sales to grow by about 20% this year.
During the first quarter of 2021, ASML received from Intel the first order for its EXE:5200, the equipment vendor’s latest high–volume EUV manufacturing tool. Shipments are scheduled to begin in 2024. ASML said the EXE:5200 would allow chipmakers to reach process nodes well beyond the current threshold (2–nm) for at least another ten years.
A global recession may emerge in the next six months, Gelsinger said. An economic downturn would likely slow demand for chips.
China, the world’s largest market for semiconductors, is already showing signs of a drop in demand. As part of its “zero–Covid” strategy, China has locked down entire cities such as Shanghai to stop the spread of the Covid pandemic.
China’s largest chipmaker, Semiconductor Manufacturing International Corp. (SMIC), saw sales grow by more than 66% during the first three months of 2022, but the company warned of weakening demand in its home market.
Demand for smartphones, consumer products, and PCs have “dropped like a rock,” SMIC co–CEO Haijun Zhao told analysts earlier this month. Some SMIC customers hold five months of inventory in the supply chain, he said, describing the oversupply situation as “very serious”.