Cisco has announced that the shortage of computer chips will last for 6 more months. Numerous firms were forced to delay the production of their products due to the lack of semiconductors, triggered by the COVID-19 pandemic and exacerbated by other factors.
Cisco says chip shortage to last 6 months
Cisco chief Chuck Robbins said that the providers are building out more capacity right now and it will eventually get better over the next 12 to 18 months.
That expansion of capacity will be crucial as advances in technology, including cloud computing, 5G, the internet of things, and artificial intelligence, drive a massive increase in demand.
Robbins is the latest tech boss to weigh in on the debate, and with 85% of internet traffic using Cisco's systems, his opinion matters.
The insatiable demand is why a lot of US manufacturer Intel announced a $20 billion plan to significantly expand production, including two new plants in Arizona.
According to Dan Ives, a tech analyst at investment firm Wedbush Securities, current demand is 25% higher than anyone would have expected.
Even though the shortage is going to be an issue for the next 3 to 6 months, technology share prices are doing well because investors are focused on the growing long-term demand for their products, according to Financial Times.
US President Joe Biden also sees this as a long-term issue and used a White House summit with business leaders this month to urge them make the country a world leader in computer chips. The chip shortage is now the top and immediately priority in the US.
The US-based Semiconductor Industry Association says 75% of global manufacturing capacity is in East Asia. South Korea's Samsung and Taiwan's TSMC are the dominant players in the market, the New York Times reported.
European politicians also want more semiconductor chips made locally, a view partly driven by concerns over China's desire to achieve reunification with Taiwan.
Demand for semiconductor chips
Meanwhile, China has been a huge growth in domestic demand of chips to power new technology, but has only a small share of global manufacturing capacity.
Pat Gelsinger told BBC that it was not possible to have so many semiconductor chips made in Asia.
TSMC appears intent on holding on to its position as the world's biggest contract manufacturer and is spending $100 billion to expand the capacity over the next 3 years.
TSMC founder Morris Chang called on the Taiwanese governments to say that it is better positioned to make chips than the US or China, despite their massive government subsidies.
The chip shortage was heightened by the pandemic. At first, a lot of companies cut their orders for chips, thinking demand would eventually fall, and it led to suppliers to reduce capacity. However, the demand for consumer electronics increased because people started working from home.
The problems have worsened by numerous other factors, including a fire at a semiconductor factory and weather issues that made transportation of chips difficult.
This factors, combined with a generational technological change has created a complicated situation for the industry, according to Paul Triolo from consultancy company Eurasia Group.
Related Article: AMD Warns PS5, Xbox Series X Chip Shortages Wil Continue Until Mid-2021, Lack of Console Supply Expected
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Written by Sophie Webster
