‘Constant Attention’ Needs To Be Given To Global Chip Shortage, Says Nokia CEO

According to the Pekka Lundmark, President and CEO of Nokia, the current viability of the supply chain of semiconductor chips in the world is not as good as it used to be abd therefore there is need for a closer monitoring of the current global chip shortage.

At the moment the global chip market is “tight”, said Lundmark who was appointed as the head of the company only last September.

“It’s not only telecoms. It’s automotive, it’s consumer gadgets, it’s the emerging IOT (internet of things) devices,” he said. “The whole semiconductor industry is actually very busy finding ways to increase capacity.”

Chips are now used for as large number of hardware and products including cars, phones, high performance computers, defense systems, AI applications and a host of other equipment. 

The cost conscious global auto industry has been particularly hard by the ongoing global chip shortage since this industry uses semiconductor chips in a large number of its functions – from the power steering and brake sensors, to entertainment systems and parking cameras. Those cars that use more advanced technologies and are more smart, use more chips to function.

The global chip shortage has for a number of major global auto companies including GM, Honda, and Ford to suspend production of some of the models which are significantly chip dependent.

However Nokia itself has not been too badly affected by the chip shortage. “We are not seeing any real shortage,” said Lundmark. “The situation is manageable, but this is a matter that requires constant attention.”

The company’s medium to long-term outlook on the chip scenario is not as good as it used to be, Lundmark added. Chips are used in its networking equipment and its smartphones by the Finnish company but it does not manufacture the chips it uses.

The biggest chip makers of the world include Taiwan’s TSMC, China’s SMIC, and South Korea’s Samsung. But the only two companies that have the technology and the capacity o manufacture the 5 nanometer chips are Samsung and TSMC.

The very expensive and complex manufacturing process of 5nm chip is the reason that there are so few manufacturing plants of this state of the art chip. Manufacturing of these chips require hi-tech equipment which is quite expensive.

The United States accounts for only 12.5 per cent of the total semiconductor chips made in the world, according to the Semiconductor Industry Association, a coalition backed by several chipmakers. On the other hand, only 10 per cent of the global production of the chips is made in Europe even though it has increased its share from 6 per cent just five years ago. The aim of the European Commission, the executive arm of the European Union, is to enhance that production capacity to 20 per cent and is looking at ways to invest about 20-30 billion euros ($24-36 billion) to achieve that goal.

In order to sort out supply issues of semiconductor chips, various countries are planning to provide funding for new chip plants. On February 24, an executive order was signed by US president Joe Biden aimed at addressing the chip shortage through a review.

(Adapted from CNBC.com)

Categories: Economy & Finance, Regulations & Legal, Strategy, Sustainability

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