Tesla CEO Elon Musk is optimistic the chip shortage situation will improve

By: Ruchi Gupta
Ruchi Gupta
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on Sep 24, 2021
  • Musk says chip shortage is a short-term problem
  • Car manufacturers are most affected by chip shortages, forcing them to suspend production.
  • Semiconductor shortage will cost the automobile industry $210 billion in revenue this year.

Elon Musk, the CEO of Tesla Inc. (NASDAQ: TSLA), stated on Friday that the current semiconductor situation would be resolved by next year. The tech entrepreneur believes the chip scarcity is a “short-term” rather than a “long-term” problem.

Several chip fabrication plants are being built

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Elon Musk said:

“There’s a lot of chip fabrication plants that are being built and I think we will have good capacity by next year.”

 However, Musk didn’t specify the kind of chip plants whew was talking to. Intel Corp and TSMC, two of the world’s largest chipmakers, have announced plans to commence new operations in the United States, but they won’t be operational for several years.

According to Glenn O’Donnell, VP and research director at advisory company Forrester, the scarcity might endure until 2023. O’Donnell  wrote in a blog post in April:

“Because demand will remain high and supply will remain constrained, we expect this shortage to last through 2022 and into 2023.”

The current global chip shortage has wreaked havoc on several businesses, but the automobile industry has been mostly hard struck. Due to a shortage of semiconductors, significant manufacturers like Ford, Daimler, and Volkswagen have been forced to halt production at various facilities and reduce their manufacturing targets.

During Tesla Q1 earnings, Musk said they were experiencing supply chain disruptions before referencing the chip shortage. Musk said:

“This quarter, and I think we’ll continue to see that a little bit in Q2 and Q3, had some of the most difficult supply chain challenges that we’ve ever experienced in the life of Tesla and same difficulties with supply chain, with parts — over the whole range of parts. Obviously, people have heard about the chip shortage. This is a huge problem.”

Chip shortage to cost automotive sector $210 billion

Consulting company AlixPartners forecasted that the semiconductor shortage would cost the automobile sector revenue close to $210 billion this year.

AlixPartners global co-leader of industrial practice and automobile sector Mark Wakefield said:

“Of course, everyone had hoped that the chip crisis would have abated more by now, but unfortunate events such as the COVID-19 lockdowns in Malaysia and continued problems elsewhere have exacerbated things.”

Everything from power steering and brake sensors to entertainment systems and parking cameras use semiconductors. The more sophisticated cars are, the more chips they employ.

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