Semiconductor chip shortage could extend into 2022: Marvell CEO

The semiconductor chip shortage that is hampering production of products ranging from cars and computers to home appliances and toothbrushes will last until 2022 and potentially beyond, the semiconductor company’s CEO said. Marvell Technology.

“Right now, every end-semiconductor market is rising simultaneously; I’ve been in this industry for 27 years, never seen this happen,” Marvell CEO Matt Murphy said during of a CNBC Technology Executive Council event on Thursday. “If this continues as usual, and all is well, this is going to be a very painful time, including 2022 for the duration of the year.”

As several chip makers announced plans to expand the plant’s capacity, Murphy, who noted his company was plantless and was working with contract manufacturers on its designs, said “it won’t start. before 2023 and 2024 – so there is this painful period “.

That’s a more pessimistic view than some of Murphy’s chip industry peers, who recently said they expect the shortage to diminish next year with the opening of new factories.

“We’ve always been through cycles of ups and downs, where demand has exceeded supply or vice versa,” AMD CEO Lisa Su said at the Code conference in Beverly Hills, Calif., On Monday. “This time it’s different.

Su said that while she expects the first half of 2022 to be “probably tight,” the second half will be less severe as manufacturing capacity opens up.

“It can take, you know, 18-24 months to set up a new plant, and in some cases even longer than that,” Su said. “These investments started maybe a year ago.”

AMD rival Intel is one of the companies that has sought to double production, announcing in March that it would invest $ 20 billion in two new chip factories in Arizona.

TSMC, which is the largest contract semiconductor maker and works with companies like Marvell, is also building a $ 12 billion plant in Arizona. The company announced in April that it would invest $ 100 billion over the next three years to increase the plant’s capacity.

Murphy said the shortage could be solved as demand for certain products using chips finally drops.

“I think there is no way, from my point of view, that every segment of the electronics industry would stay up and right, ripping demand apart for another 12 months; it just doesn’t make sense,” Murphy said. “I think something has to give. And when it does, that should free up the overall capacity for the rest of the industry to go out and consume and ultimately align with real demand.”

The slowdown in demand could come from areas such as the personal computer market, Murphy said, citing Micron Technology’s weaker-than-expected sales forecast for its next quarter.

Micron Technology CEO Sanjay Mehrotra told CNBC’s “Mad Money” Wednesday that while demand from end-users for PCs is strong, “some PC customers are unable to meet their demand because they are not getting enough of all the components needed to build the PCs. “

More than 300 million personal computers were sold in 2020, according to market intelligence firm IDC, up from 268 million in 2019.

This has led some analysts to project over 400 million PC sales in the coming years, but it’s a sales trajectory Murphy expressed doubts about at the CNBC TEC event.

Ultimately, Murphy said he expects there will be “huge pockets of over-inventory when this is all over.”

“If you look at the number of masks, hand sanitizers, or toilet paper going around, there has been a panic, and there is a panic buy on semiconductors right now,” he said. he declares. “At one point you order an order and it goes the other way around.”

Any chip inventory relief would be welcomed by the auto industry, which has perhaps been hit hardest by the semiconductor shortage.

General Motors said on Friday that vehicle sales in the United States in the third quarter fell more than 30% year-on-year as the chip shortage halted production and reduced inventory available at dealerships.

Last month, the automaker again shut down production at most of its North American factories due to a lack of semiconductor chips. This shortage has forced General Motors to move its available chips only to its most popular and profitable vehicles, such as pickup trucks.

Overall, auto sales in the United States are expected to fall by at least 13% in the third quarter due to disrupted production linked to the chip shortage, according to industry estimates.

Still, several automakers have suggested that these issues could be fixed soon.

“The semiconductor supply disruptions that affected our wholesale and customer shipments in the third quarter are improving,” said Steve Carlisle, GM’s president for North America, in a statement. “As we look into the fourth quarter, a steady stream of vehicles held in factories will continue to be distributed to dealerships, we are restarting production in major crossover and car factories, and we look forward to a more favorable environment. ‘more stable operation until the fall. “

Tesla CEO Elon Musk recently called the semiconductor chip shortage a “short-term” problem, saying “there are a lot of chip-making factories under construction and I think we will have a problem. good capacity by next year “.

Murphy said the semiconductor shortage has changed some of the thinking when it comes to the supply chain.

“Even before the pandemic hit, there was a tightening happening,” he said. “Chipmakers actually need to take a different view now of sourcing entry, it’s a strategic imperative in terms of planning your capacity, your relationships with your suppliers.”

Buyers are more willing to pay for capacity up front or sign firm purchase agreements, which would mean the company would take the supplier’s product or pay a penalty, Murphy said.

“We see this as a strategic shift towards strategic capability, not just an afterthought,” he said.