Global chip shortages to last for another six months, Cisco CEO

Jaguar Land Rover has suspended production at two plants due to a shortage of computer chips

The global computer chip shortage is set to impact supply chains for the rest of the year, according to Cisco CEO Chuck Robbins.

"We think we've got another six months to get through the short term," Robbins told the BBC in an interview.

"The providers are building out more capacity. And that'll get better and better over the next 12 to 18 months," he added.

The problem at the moment is "big", Robbins thinks, simply because semiconductors are used "in virtually everything."

The curtailed supply of chips has disrupted many industries, who reduced chip orders at the start of the Covid-19 pandemic, thinking that the demand would fall. The fall in demand led chipmakers to reduce production at their facilities.

But the demand for consumer electronics, such as smartphones, laptops and PCs, increased during the pandemic after most firms asked their employees to work from home. This led to a chip crisis, affecting many industries worldwide.

The global chip supply has also been worsened due to other factors, including a drought in Taiwan and a blaze at a semiconductor factory in Japan.

Taiwan, the leading chip supplier, has been facing one of its worst droughts in decades, and people there are waiting for monsoon rains to alleviate the shortages. The country usually experiences three or four tropical storms each year, but saw no typhoons in 2020.

Earlier this month, it was reported that Taiwan's Water Resources Agency has shut off irrigation across tens of thousands of acres of farmland to ensure that the country's semiconductor industry continues to receive precious water amid the ongoing drought.

In March, Taiwan's Minister of Economic Affairs, Wang Mei-hua, told reporters that the country had enough water reserves to keep local chipmakers running till late May.

A chipmaking facility typically uses about two to four million gallons each day to clean the factories and wafers.

Ninety-two per cent of the world's sub-10nm chips are produced in Taiwan, according to a recent study co-authored by the Semiconductor Industry Alliance, which means that there could be "severe interruptions in the supply of chips" if the drought situation in Taiwan does not improve in coming months.

Most carmakers across the world have been facing problems due to chip shortage. Nissan, Ford and Honda, have either slowed or temporarily halted production at some of their plants.

Last week, Jaguar Land Rover (JLR) said that its car manufacturing plants in Castle Bromwich and Halewood will undergo a temporary suspension starting 26^th April due to a shortage of computer chips.

"We have adjusted production schedules for certain vehicles which means that our Castle Bromwich and Halewood manufacturing plants will be operating a limited period of non-production from Monday 26th April," Tata-owned JLR said in a statement.

While the firm did not say when the facilities would resume working again, the shutdown is likely to last longer than a week. JLR said that it would continue to monitor its chip supply before announcing a reopening date.

Robbins told the BBC that it doesn't matter much where computer chips are produced as long as there is a diversity of supply globally.

"What we don't want is to have consolidation where any of the risks that we may face could, frankly, result in the situation we're seeing today, whether it's weather-related disaster risks, whether it's single point of failure risk, whether its geopolitical risks, whatever those are," he said.

"We just need more options, I think, for where semiconductors are built."