Name: The global chip shortage will probably hit your everyday life | CNBC Beyond The Valley
Uploaded: 2021-10-08T17:40:42.000Z
Duration: 22 min 42 s
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Hello, and welcome to another episode of CNBC's Beyond the Valley, I'm Arjun Kharpal in Guangzhou,

China now, Beyond The Valley listeners, you or someone you know, may have struggled to

Adverbs of manner

get their hands on, say, a consumer electronics product recently, maybe a games console.

Or maybe you've struggled to get your hands on a new car.

Well, this is a result of currently, what is a global semiconductor or chip shortage

And that's the topic of Beyond the Valley today.

Now, these chips are or micro processors are very tiny components that go into many of

the items we use on a daily basis, such as your smartphones, but even things like fridges,

And that's really why this global semiconductor shortage is such an issue and a crisis right

now that has impacted industries across the board.

So far, the automakers have really borne the brunt of it at this point, but you are seeing

expand to so many different industries as well.

Well, I'm glad to be joined by Sam Shead, who is our technology correspondent, out in

London, Sam, good to have you on beyond the valley for the first time.

Well, look, this is a topic you've been looking at for several months now digging deep into it.

And what's happening behind the scenes here, so just give us an overview of you know, how

Well, the simple answer is demand has been outstripping supply.

There's basically not enough chips to go around.

It's a little bit more complicated than that, though.

These chips are made at huge factories or foundries as they're otherwise known, sometimes

And these, these big factories can only make so many chips basically, they have to decide

which chips they want to make months in advance.

So last spring, car companies started to reduce their production targets and chip purchases

At the same time, chipmakers saw a pickup in demand for semiconductors used to support

things like remote working, and gaming, then the demand for automotive chips rallied back

a lot quicker than most people anticipated.

But the foundries were already busy making other more sophisticated chips for companies

And to make matters worse, Chip factories themselves have also been hit by Coronavirus lockdowns.

That's a great overview and some of the points we're going to dig deeper into with our guest

But Sam, I just want to ask you as well, a lot of major executives of companies around

the world have been commenting on this issue recently.

What have they had to say about what they're facing right now?

And sort of how they see this playing out even when it might end?

So opinions vary, but most people are kind of saying it's going to go on to next year

Elon Musk, CEO of Tesla, he said last week that he sees things getting better next year

as more chip plants come online, but then yeah, as I said, there are some analysts who

That's a, that's a great setup Sam and you know, there's a lot of uncertainty as well.

Of course those are those are what these executives are saying there's so many variable factors

in all of this around the world, including you know how the Coronavirus situation continues

And that's certainly going to feed into this.

Well, Sam, that was a great setup and I want to dig deeper into some of those topics with

our guests for this episode Peter Hanbury, a partner at Bain and company at the company's

technology, media and telecommunications practice focusing very heavily on semiconductors.

Peter, thanks so much for joining us on this episode.

So Peter, let's just kick off the conversation with the question, you know, why are we facing

And a lot of industries are asking this exact question.

We like to think about it really in two phases with slightly different positives.

At first phase was really highlighted by the automotive chip shortage.

And what happened there is when COVID hit, they pulled back of their orders and the capacity

that they had reserved, went to other industries.

Combine that with a lack of traceability and visibility into their supply chains, lack

of inventory and, and they were hit pretty quickly and hard by the semiconductor shortage.

The second phase is a bit of a different story.

And this is where you're seeing books like PC makers, apple, Samsung Qualcomm being impacted,

and the story there is a bit more challenging.

What's driving that is the demand for electronics as folks have shifted to work from home have

And these industries are now being impacted by just structurally there's more demand than

And so instead of the auto industry losing a small portion of the semiconductor market

that they used to have access to, this is really the overall semiconductor market has

And that's a much more challenging structural problem, just given how long it takes to add

So when it comes to the length of the chip shortage, Peter, you've got people like Elon

Musk saying this is a short term phenomenon.

And that things will be back to normal next year, because more and more plants are going

But the factories that have been announced by the big chip makers like tsmc, and Intel,

So those two things seem to be at odds with one another.

And I think there are two ways in which this crisis is all the way number one is, you know,

Typically to build a new factory, it takes about three to four years.

And so there is some capacity that's coming online, for example, Bosch and Dresden and

Infineon and Villach announced fabs in the 2018 timeframe, and those are just starting

to come online, and they're gonna help this situation a bit.

But like you noted, a number of the announcements made recently, you know, are things that are

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