Tesla’s Musk Sees Chip Shortage Ending Next Year

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Tesla chief executive Elon Musk sees chip constraints ending next year, as IDC projects ‘normalisation’ by mid-2022 – but others are less optimistic

Tesla chief executive Elon Musk has said he believes the worldwide chip shortage is a “short term” problem that could fade next year.

Asked how long he thought the shortage would continue to affect vehicle production, Musk said, “short term, I think”.

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

His remarks coincide with a report by IDC last week forecasting a return to “normalisation and balance” in chip supply by the middle of 2022.

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Constraints

In fact, large-scale capacity expansions coming online toward the end of 2022 could lead to excess capacity in 2023, the analyst firm said.

The company said it sees automotive semiconductor revenues increasing by 22.8 percent in 2021 as shortages are “mitigated by year-end”.

Overall IDC said it sees the semiconductor market growing by 17.3 percent for the year, up from 10.8 percent in 2020.

But others in the industry have expressed less optimism, saying they expect the chip shortage to continue for at least another year.

In April, Forrester research director Glenn O’Donnell said the chip backlog “is still taking time to flush through”.

‘One to two years’

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

In July, Intel chief executive Pat Gelsinger said he expected shortages to “bottom out in the second half”, but added it would “take another one to two years before the industry is able to completely catch up with demand”.

Last week British car brand Vauxhall said more than 200 jobs could be cut due to the chip shortage.

Vauxhall owner Stellantis is one of the many car makers that have had to slow production due to constrained chip supplies.

Consulting firm AlixPartners last week estimated the shortages would cost the car industry some $210 billion (£154bn) in revenues this year alone, and said the Covid-19 lockdowns in Malaysia and other factors were prolonging the problem.

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