Pat Gelsinger, CEO of Intel, at the US Senate hearing on semiconductors © Tom Williams / Getty Images
Pat Gelsinger, CEO of Intel, at the US Senate hearing on semiconductors © Tom Williams / Getty Images

How much has the semiconductor shortage cost?

5 May 2022

Intel has warned the semiconductor crisis is expected to last into 2024 after the shortage cost the US economy $240bn last year.

In its first quarter results the company said Covid-19 lockdowns in Shanghai and Russia’s war in Ukraine were “further increasing supply chain risk and contributing to inflationary pressures”, exacerbating the shortage. 

Pat Gelsinger, CEO of Intel, said: “In the supply chain, lockdowns in Shanghai and the war in Ukraine have demonstrated more than ever that the world needs more resilient and more geographically balanced semiconductor manufacturing. 

“The chip shortage cost the US economy $240bn last year, and we expect the industry will continue to see challenges until at least 2024 in areas like foundry capacity and tool availability.”

Intel saw revenues fall by 7% in the first quarter of 2022 year-on-year, from $19.7bn to $18.4bn. Net income rose by 141%, from $3.4bn to $8.1bn, which included proceeds of $4.9bn from the sale of McAfee.

Gelsinger said the company was looking to create a “balanced semiconductor supply chain” after it announced it was investing $95bn in opening and upgrading semiconductor plants in Europe to reduce global dependency on Asia.

Gelsinger said the company was working towards its “moonshot goal” of having half the world’s semiconductor manufacturing located in the US and Europe.

However, he said: “The pace at which we can reach this goal is dependent on the actions of the US and other governments. America showed leadership when Congress passed the Chips Act, but the global situation has grown even more serious since then.” 

Gelsinger praised the EU’s European Chip Act, which looks to double the bloc's share of global semiconductor production. “I continue to encourage Congress to fund this critical legislation and enable us to move faster toward making a balanced semiconductor supply chain a reality,” he said.

“Semiconductors are the fuel of innovation.”

The semiconductor shortage has hit production across tech and automotive firms because chips form the basis for vital circuit boards. 

Commenting on the shortage, Joshua Nicholls, senior consultant at supply chain consultancy Proxima, said: “The semiconductor shortage is causing significant issues for all industries, but the automotive sector is experiencing particular challenges. What we’re seeing in the market is businesses like Volvo who are getting on the front foot and taking steps to look at their sourcing strategy and ultimately ensure that they are as insulated as possible from these supply constraints. 

“Fortunately, there are steps that businesses can take, it’s important that they strengthen relationships with their supplier base to increase their chances of accessing key components, being more flexible and creative in terms of which components they are sourcing and ensure that forecasting takes place and future constraints are addressed as much as possible.”

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