▶ Watch Video: Soaring demand for chips reveals global supply chain problem
The leading supplier of key microchips used in U.S. cars has increased production to help close a shortage caused by the pandemic. Dr Mark Liu, Chairman of the Taiwan Semiconductor Manufacturing Company (TSMC), tells this to Lesley Stahl in his first television interview, airing Sunday on 60 Minutes. The chip shortage, which has forced carmakers to idle plants and workers throughout the country, has underscored the U.S. reliance on chip manufacturing in Asia. It revealed how fragile the global supply chain of chips can be, and its inability to react to a sudden surge in demand.
Stahl spoke to Liu remotely from TSMC headquarters in Hsinchu, Taiwan. TSMC is the world’s most advanced chip manufacturer. It makes the semiconductors that end up in Americans’ iPhones, the supercomputer managing the U.S. nuclear arsenal, and most American autos. In March 2020, as the pandemic shut down the U.S., car sales tanked, leading automakers to cancel their chip orders. This prompted TSMC to stop making them.
But then car sales unexpectedly shot back up late last year. Automakers renewed their orders, but chip production takes time, creating the shortage that is causing carmakers to lose billions of dollars as they wait. TSMC told 60 Minutes it is focused on manufacturing the needed chips.
“We heard about this shortage in December… And in January, we tried to squeeze as [many] chip[s] as possible to the car company[ies],” Liu tells Stahl. “Today, we think we are two months ahead, that we can catch up [to] the minimum requirement of our customers. By the end of June.”
But he clarifies that does not mean the chip shortage will end in two months. It will take a few more for the supply chain to right itself and there may be supply chain issues of which he is not aware.
“There’s a time lag,” Liu explains. “In car chips particularly, the supply chain is long and complex…The supply takes about seven to eight months.”
This means the shortage is more likely to be alleviated by year’s end or early 2022.
“Should Americans be concerned that most chips are being manufactured in Asia today?” Stahl asks Liu.
“I understand your concern,” he responds. “But this is not about Asia or not Asia, because a shortage will happen no matter where the production is located […] because it’s due to the COVID.”
Meanwhile, Pat Gelsinger, the new CEO of Intel, the largest American chipmaker, says his company is also working to address the car chip shortage and will reconfigure some of its fabrication plants to churn out the needed chips. But that will also take a minimum of several months, and alleviating the overall tight supply in chips will take even longer.
“I think we have a couple of years until we catch up to this surging demand across every aspect of business,” Gelsinger tells Stahl.
Today, 75% of semiconductor manufacturing is in Asia.
“Years ago, the United States produced 37% of the world’s semiconductor manufacturing in the U.S. Today, that number has declined to just 12%,” says Gelsinger. “And anybody who looks at supply chain says, ‘That’s a problem.'”
He adds, ”This is a big, critical industry and we want more of it on American soil. The jobs that we want in America, the control of our long-term technology future.”
President Biden has proposed seeding the semiconductor industry in the U.S. with $50 billion in taxpayer money as part of his infrastructure plan.
But Stahl challenges Intel’s incoming CEO, who started in February, about Intel’s past practice of spending more money to buy its stock back over investing in research and development. Gelsinger promises: “We will not be anywhere near as focused on buybacks going forward as we have in the past. And that’s been reviewed as part of my coming into the company, agreed upon with the board of directors.”
Stahl’s 60 Minutes report about the crucial semiconductor industry will be broadcast Sunday, May 2, at 7 p.m. ET/PT on CBS.