Fixing chip shortages will take time: MD Intel India

Abhishek Law Kolkata | Updated on July 11, 2021

‘Demand for chips is expected to remain very strong for longer than we expect’

It will “take time” for chip shortages to be fixed even though the necessary interventions to the ecosystem, including ramp-up of capacities, are being made, says Prakash Mallya, VP and MD of Sales, Marketing and Communications Group, Intel India.

Shortages have so far been mainly about power management integrated circuits (ICs) and driver ICs. Firms outsource production of chips to older fabs to control costs. These older fabs are unable to meet a sudden surge in demand, witnessed since H2 of CY2020. These (chips) are used across most devices including laptops, smartphones, gadgets, printers and even automobiles.

The situation in India, on shortages, is no different from elsewhere in the world. Most smartphone and laptop-PC manufacturers say they are struggling to meet demand while retailers point out to diversion of demand from one brand to another, driven primarily by supply shortages. Some mobile-phone makers have stopped offline expansion too.

According to Mallya, the US-based chip-maker’s ownership of its factories has left it better placed to keep up with demand. But supply of the other components of computers has fallen short. Intel, it may be mentioned is already investing $20 billion towards setting up two factories in Arizona (US) and opening its factories to outside customers.

“We are just one of the components. But there is a shortage of other components too. Moreover, if you see, chip-shortage is a secular trend across players and companies. We are helping out other players in the ecosystem and working with elements in the supply chain too; while adding to our capacities in the US,” he told BusinessLine.

Intel, the world’s largest chipmaker, gets the majority of its sales from providing processors that run personal computers and servers, machines that are central to data centers and corporate networks. It is amongst the few remaining semi conductor companies that designs and manufactures its own chips.

Chip demand exploded driven by working-from-home arrangements, rising interest in chip-intensive electric vehicles, the rollout of 5G cellular services, automation trends, among other factors. People also have had a tendency to replace their use of offline services (for example eating out) with the consumption of goods (like buying a new device) during the pandemic.

Strong demand in India

“The demand for chips is expected to remain very strong for longer than we expect. So it will take some time to fix (shortages),” Mallya added. Most estimates peg global chip shortages to continue well into first half of 2022.

As per IDC, the traditional PC market (inclusive of desktops, notebooks, and workstations) grew a whopping 73.1 per cent YoY in Q1(Jan-Mar) CY21. A total of 3.1 million PCs were shipped, recording the highest ever first-quarter shipments.

In India, the company is already working with OEMs, channels and partners to ensure supplies are maintained.

“It takes time to put up a fab and huge investments too. Being a major player of the ecosystem, we are ramping up global capacity,” he said.

Semiconductor industry in India

Policy intervention towards promoting the semi-conductor industry is important Mallya says, adding that it may take years for the ecosystem to come up here.

“The manufacturing may not happen today, but it will move in that direction over a period of time, given the opportunity. The ecosystem around semiconductors and devices is diverse. You have phones and PCs (personal computers), but that’s just the consumer-facing (side). You then look at industrial IoT (internet of things) and several other ways, everything that’s connected is going to compute,” he added.

Intel has already invested close to $ 7 billion in its Indian operations comprising engineering, R&D and sales and marketing. The company continues to co-engineer PC platform innovations with all major OEMs and recently announced its first 5G product for the next generation of PC experiences.

“We also believe businesses will be the first adopters of 5G and we are looking at a play across edge-based devices and solutions. India continues to be amongst the important markets for Intel,” Mallya said.

Published on July 10, 2021

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