SINGAPORE – Chip makers will take months to make up for the lack of supply for the automotive sector, predicts Randy Abrams, from Credit Suisse.
“You could say it’s a global chip squeeze or shortage,” Abrams, Taiwan’s head of research in the company’s stock research department, told CNBC’s “Street Signs Asia” on Tuesday.
Abrams’ comments came at a time when automakers around the world are closing assembly lines due to problems in semiconductor delivery, according to Reuters.
The current shortage comes at a time when chip makers reduced production in the middle of last year as customers cut back on orders, explained Abrams. He added that the shortage of chips for the automotive sector created a bottleneck in which vehicles cannot be manufactured due to the lack of some components.
“I think by the middle of the year, we should start catching up,” he said, but he warned that it will be “a couple of quarters difficult to reach those orders.”
Taiwan Semiconductor Manufacturing Company, the world’s leading foundry, is among the companies that are still trying to keep up with rising demand.
Reuters reported on Monday that TSMC will prioritize the production of automotive chips if the company is able to further increase capacity. The report cited the Taiwan Ministry of Economy.
For the first time in a long time, semiconductors are limiting automobile production.
Randy Abrams
Taiwan Research Chief, Credit Suisse
The Covid-19 pandemic brought down almost all sectors of the world, as businesses and economies were forced to close due to the blockages, causing supply chain problems and widespread job losses.
The auto industry has not been spared, with the Boston Consulting Group predicting in a December report that sales in Europe and the United States “will not recover to pre-COVID levels until 2023, at the very least.”
Lack of advanced chip makers
The scarcity highlights the “strategic importance” of the chips, said Abrams.
“For the first time in a long time, semiconductors are limiting car production,” he added.
In addition to the automotive industry, these challenges are also seen in other sectors, such as cloud computing and artificial intelligence, he said.
There are now fewer manufacturers capable of making more advanced chips compared to previous industry recoveries, said the Credit Suisse analyst, citing Samsung Electronics and Intel as the other two “advanced manufacturers” with these features.
“It is a reality that the industry is having to deal with – it is becoming more complicated to make advanced chips,” said Abrams.
Competition between the biggest chip makers is also heating up.
Intel, which has lost market share to competitors such as AMD, Samsung and TSMC, recently announced the appointment of industry veteran Pat Gelsinger as CEO.
Meanwhile, Bloomberg reported on Friday that Samsung Electronics is considering building its most advanced logic chip factory in the United States. This came after TSMC said in May that it would build a semiconductor plant in Arizona, with total project expenditures reaching $ 12 billion.
– Lauren Feiner from CNBC and Arjun Kharpal contributed to this report.