Chipmakers to take quarters to meet automotive demand: Credit Suisse

SINGAPORE – It will take months for chipmakers to catch up with a supply shortage in the automotive sector, predicts Randy Abrams of Credit Suisse.

“You could say it’s a global chip shortage or strain,” Abrams, head of Taiwan research in the company’s stock research department, told CNBC’s “Street Signs Asia” on Tuesday.

Abrams’ comments came as automakers around the world shut down assembly lines due to semiconductor delivery issues, according to Reuters.

The current shortage comes as chipmakers cut production around the middle of last year as customers cut back on orders, Abrams said. He added that the lack of chips for the automotive industry has created a bottleneck in which vehicles cannot be built due to the lack of certain components.

“I think by the middle of the year we should start to catch up,” he said, but warned it will be “tough quarters to catch up on those orders.”

Taiwan Semiconductor Manufacturing Company, the world’s largest foundry, is one of the companies still trying to meet growing demand.

Reuters said on Monday that TSMC would prioritize the production of automotive chips if the company is able to further increase capacity. The report quotes the Taiwanese Ministry of the Economy.

The Covid-19 pandemic has shaken nearly every industry around the world, with businesses and economies forced to shut down due to lockdowns, triggering 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 rebound to pre-COVID levels until 2023 at the earliest.”

The shortage highlights the “strategic importance” of chips, Abrams said.

“For the first time in a long time, semiconductors are limiting automotive production,” he added.

Beyond the auto industry, these challenges are also seen in other industries such as cloud computing and artificial intelligence, he said.

There are now fewer manufacturers capable of making more advanced chips compared to previous industry takeovers, the Credit Suisse analyst said, citing Samsung Electronics and Intel as the other two “advanced manufacturers” with such capabilities.

“It’s a reality that the industry has to face – it’s getting more and more complicated to manufacture advanced chips,” Abrams said.

Competition between the best chipmakers is also intensifying.

Intel, which has lost market share to competitors like AMD, Samsung and TSMC, recently announced the appointment of industry veteran Pat Gelsinger as CEO.

Meanwhile, Bloomberg reported on Friday that Samsung Electronics was planning to build its most advanced logic chip manufacturing plant in the United States, after TSMC announced in May that it would build a semiconductor facility in Arizona, the total project expenditure amounting to $ 12 billion.

– CNBC’s Lauren Feiner and Arjun Kharpal contributed to this report.