What is the current situation of the chip industry, is it better or worse compared to previous months?
The unprecedented demand for semiconductor components and substrates has posed an immense challenge to many industries, from smart devices such as phones and home appliances to automobiles, including ours. The Covid-19 pandemic has massively disrupted semiconductor shipments as global demand soared, causing a disruption in the supply chain.
The shortage has been felt for nearly two years due to the imbalance between supply and demand. As more and more people use smart mobile devices, chipmakers have had to rapidly increase production to meet growing demand.
Industry supply constraints currently demonstrate why it is essential to invest in capacity before demand. We recently announced the Integrated Device Manufacturer (IDM) 2.0 strategy, outlining the company’s investment plans of more than $40 billion in the United States and $80 billion in Europe over the next decade, will surely us a major provider of foundry capacity in the United States and Europe and give us additional capacity to alleviate the continued shortage of chips and better serve our customers globally.
These plants will meet the growing demands of our current products and customers and provide committed capacity for foundry customers.
Intel’s investment will further boost Europe’s unprecedented innovation hub and have significant positive spillovers across industries and member states.
Intel is on track to meet its 2030 sustainability goals, including achieving net positive water use by conserving, recycling, and reclaiming water, and funding local water supply projects. water that restores more fresh water than it consumes.
Will the current shortage last in the short, medium or long term and what factors will contribute to accelerating its stabilization?
We believe that the global chip shortage could continue into 2024 due to the limited availability of key manufacturing tools, which would pose a barrier to increasing the capacity levels needed to meet high demand.
If we look at the growing demand across all sectors, complemented by the growing internet penetration triggered by the pandemic as more and more people work remotely, the demand will only increase, reinforcing the fact that a shortage world of semiconductors could take longer to resolve.
Intel’s IDM 2.0 strategy combined with investment plans across the entire semiconductor supply chain – from research and development to manufacturing to advanced packaging technologies, will surely help add stability to this critical supply chain.
Additionally, as part of IDM 2.0, by strengthening our existing relationships with third-party foundries that manufacture a range of Intel technologies – from communications and connectivity to graphics and chipsets – we can navigate this challenging environment with better control over our supply chain. In addition, our ability to work with customers around the world plays a central role in meeting the challenge.
Semiconductors are the underlying technology that powers the digitization of everything and this is accelerated by what CEO Pat Gelsinger calls the four superpowers – ubiquitous computing, ubiquitous connectivity, cloud-to-edge infrastructure and AI. We intend to lead the industry in harnessing these superpowers for the growth of our customers and our own.
These four extraordinary technological capabilities have become major market forces. They will fundamentally change the way we experience technology and interact with devices, ranging from PCs to other connected devices, even our homes and cars.
The four superpowers will also exponentially increase global computing needs by packing ever more computing power into ever smaller microchips. This is where Intel plays and wins: our semiconductors are the underlying technology that empowers developers and enables our customers’ innovations.
What lessons has the industry learned about the shortage?
I think there are two things to remember from the last two years. First, the importance of investment. The time spent investing in building a resilient ecosystem is a critical lesson that organizations and industries have learned as the chip shortage continues to loom.
We put all our chips on the table. Last year, as part of our IDM 2.0 strategy, Intel announced an investment of nearly $43.3 billion to expand our FAB sites (semiconductor manufacturing sites) across the United States. These include two new FAB sites in Arizona for an investment of $23.3 billion, with plans to expand capacity in New Mexico. On top of that there was a US$3 billion FAB expansion in Oregon and an additional investment of over US$20 billion to build two new fabs in Ohio. Additionally, our planned investment of €80 billion over the next decade in Europe will add stability and geographic diversity to the supply chain.
This gives us superior agility in a constrained supply environment. As we plan to expand our presence in the United States and Europe in the coming years, this will help strengthen a sustainable and secure global semiconductor supply chain.
The second is collaboration with partners. We are actively working with our supply chain partners to increase the availability of third-party materials and components to further improve production and also support the wider PC ecosystem.
Which industries that need chips will return to parity sooner than others?
The crisis has been devastating for the global supply chain over the past two years. The auto industry has faced some of the most significant issues globally, but it is likely to be the fastest recovering industry. The industry is undergoing a profound transformation as vehicles become electric, safer, smarter and more connected. These trends are driving tremendous growth, with automotive silicon revenues expected to double to $115 billion by 2030.
In an effort to facilitate a faster recovery, Intel Foundry Services (IFS) is forming a dedicated automotive group to provide a comprehensive solution to automakers with three clear priorities.
The first is our Open Central Compute Architecture, where IFS will develop an open, high-performance automatic computing platform that will enable automotive OEMs to create next-generation experiences and solutions for their vehicles.
The second is our “Automotive-Grade Foundry Platform,” which enables manufacturing technologies that meet the stringent quality requirements of automotive applications and customers. IFS targets both cutting-edge nodes and technologies optimized for microcontrollers and unique automotive needs, in combination with advanced packaging, to help customers design multiple types of automotive semiconductors.
And the third is “Enabling the Transition to Advanced Technologies,” where IFS will offer design and Intel IP services to automakers, enabling them to leverage Intel’s expertise from silicon to system design. The automotive IFS Accelerator program, announced last year, is designed to help automotive chipmakers transition to advanced process and packaging technologies and innovate with Intel’s custom and industry-standard IP portfolio.
Why is the industry struggling when it is already in the post-Covid era?
Indeed, the semiconductor industry continues to catch up with the devastating effects of Covid-19 and the explosion in demand for chips. Companies have placed inflated orders to ensure increased inventories, which is also putting additional pressure on manufacturers. We have measures in place to try and stop overordering, but this is only a temporary solution to a bigger problem.
According to the Semiconductor Industry Association, global semiconductor sales hit a record US$556 billion in 2021, up more than 26% from 2020, heightening the need for investment and capacity increases . Like many other semiconductor manufacturers, Intel has had to increase capacity and investment in response to supply constraints. Our FABs are operating near capacity, but as global supply chains remain strained, increased demand is only adding pressure on the semiconductor industry.