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Intel says US chip shortage will persist till 2024

Intel forecast second-quarter revenue and profit below Wall Street expectations on Thursday on worries of demand weakness in its largest end market, PCs, and increased supply-chain uncertainty due to lockdowns in China.

April 29, 2022 / 12:22 PM IST
Representative image (Shutterstock)

Representative image (Shutterstock)

Shortage of semiconductors in the US will persist till 2024, Intel CEO Pat Gelsinger said on April 28, claiming the dearth of chips had cost the American economy about $240 billion in 2021.

"We expect the industry will continue to see challenges until at least 2024 in areas of foundry capacity and tool availability," Gelsinger said.

Intel forecast second-quarter revenue and profit below Wall Street expectations on Thursday on worries of demand weakness in its largest end market, PCs, and increased supply-chain uncertainty due to lockdowns in China.

Shares of the company fell five percent in after-market trading.

Rising inflation, resurgence of COVID-19 in China and uncertainties around the war in Ukraine have shifted consumer spending away from gadgets, hurting Intel, which saw more than half of its revenue last year coming from the segment selling processors for PCs.


Intel finance chief David Zinsner said component supply constraints continue to be a challenge with the most recent lockdowns in Shanghai further increasing supply-chain risks and contributing to inflationary pressures that are having a negative impact on PC market for the year.

Analysts say the PC market is coming off of searing rates of growth over the last two years as remote working and learning triggered high demand during the pandemic.

As lockdowns in China continue, supply-chain bottlenecks are likely to hurt Intel's customers, in turn affecting the chipmaker's business.

Meanwhile, India too is in talks with Intel, GlobalFoundries Inc and Taiwan Semiconductor Manufacturing Co for setting up local operations.

PM Modi late last year unveiled a $10 billion incentives plan, offering to cover as much as half of a project’s cost, to lure display and semiconductor fabricators to set up base in India. The country has set itself the ambitious goal of emulating neighbouring China and becoming the electronics factory of the world.

“Most of the pitches to these big companies, I’m making myself,” Rajeev Chandrasekhar, a former Intel engineer and current minister of state for technology and entrepreneurship, told Bloomberg News in an interview on Monday. “We’re meeting the CEOs, talking to them, making presentations."

In an interview with Moneycontrol, Chandrasekhar had said that the addressable opportunity is for a minimum of $110 billion of semiconductors that will be required in India by 2030.

"For India, semiconductors are a very important natural expansion because we have an underlying demand for electronics that are going to be driving the demand for semiconductors. Then we have two or three other areas of innovation like automotives, mobile communication and computing – all three are strategic areas of growth and focus for us and the siliconisation intensity in all three categories is increasing. That is further driving justification for semiconductors," he said.

"The third and very important piece is that semiconductors are now not just Fab-led or process led. The design element of semiconductors and the innovation on semiconductors are as important to the future of the semiconductor ecosystem in which we are very good. Therefore, it makes very logical sense as we grow our digital economy, we also are creating very viable, practical opportunities for semiconductors as well," he added.

"I’m saying all this to contrast India’s move into semiconductors from other countries who seem to be doing this with a tactical, kneejerk geopolitical consideration. Ours is demand-led digital economy with capability and competency. Plus, India will be the largest Fab that will be non-China proximal," Chandrasekhar said.

Earlier today, while inaugurating a three-day Semicon India Conference-2022 in Bengaluru, Modi listed six reasons why semiconductor investors should consider India.

The conference was intended to serve as a launchpad for India to become a worldwide semiconductor hub. The prime minister said semiconductors are playing a critical role in more ways that one can imagine.

"New world order is forming, we must seize this opportunity. India has the appetite for risk, have put the odds in the industry's favour -- India means business," he said.


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Moneycontrol News
first published: Apr 29, 2022 12:22 pm
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