Elon Musk Expects Chip Shortage to Be Short-Lived as Production Capacity Expands

Tesla chief executive Elon Musk said Friday that he sees an end to the semiconductor supply shortage in relatively short order thanks to new chip plants being planned and already under construction.

“There’s a lot of chip fabrication plants that are being built,” Musk said via video uplink at an Italian Tech Week event. “I think we will have good capacity for providing chips by next year.”

Musk’s remarks follow comments made earlier in the week by General Motors President Mark Reuss, who said he expects the global supply of chips to stabilize but at lower levels than automakers need to rebuild their inventories.

“We’re going to see a stabilization to some extent before we see getting the volume that we really need,” Reuss said at a conference hosted by the Detroit Regional Chamber in Michigan on Sept. 21, where he discussed GM’s plans for battery-powered car and truck production.

Meanwhile, a recent report from consulting firm AlixPartners estimated that the global semiconductor shortage will lead to 7.7 million fewer vehicles produced in 2021, costing automakers $210 billion in lost sales.

Automobiles have become increasingly dependent on semiconductors for everything from safety features such as airbag deployment and emergency braking assistance to computer management of engines for better fuel economy and performance.

The spread of COVID-19, the disease caused by the CCP (Chinese Communist Party) virus, has disrupted semiconductor manufacturing, with carmakers now facing stiff competition from the sprawling consumer electronics industry for the reduced supply of chips. The shortage has led to production cuts by automakers around the world.

Musk earlier addressed the chip supply problems, noting during an investor call in July that “while we’re making cars at full speed, the global chip shortage situation remains quite serious.”

“For the rest of this year, our growth rate will be determined by the slowest part in our supply chain which is a—there’s a wide range of chips that are at various times the slowest part in the supply chain,” he said, according to the transcript of the call.

While the United States remains the global leader in chip design, roughly 80 percent of semiconductor foundries and assembly and test operations are concentrated in Asia.

Washington has recognized the vulnerability of foreign semiconductor supply chain reliance, with Commerce Secretary Gina Raimondo calling the lack of chip production in the United States a “national security risk.”

President Joe Biden has called for increased investment to revitalize U.S. chip manufacturing, while bipartisan efforts on Capitol Hill have sought to bolster domestic semiconductor supply chains by incentivizing manufacturing in the United States.

Raimondo and White House economic adviser Brian Deese hosted a semiconductor supply chain meeting at the White House on Sept. 2, with participants including Detroit’s Big Three automakers, Daimler, BMW, Microsoft, Samsung, TSMC, Intel, and Apple.

The White House pressed companies to provide information on the chip supply shortage within 45 days, with a readout of the meeting indicating that the administration “reaffirmed that industry needs to be in the lead in resolving the supply chain bottlenecks that are occurring due to the global chip shortage.”

Some participants told Reuters that they were concerned the information-sharing measures could require disclosing confidential pricing information. 

By Tom Ozimek

 

Tom Ozimek has a broad background in journalism, deposit insurance, marketing and communications, and adult education. The best writing advice he’s ever heard is from Roy Peter Clark: ‘Hit your target’ and ‘leave the best for last.’

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