Intel (INTC) CEO Pat Gelsinger said the chip shortage is starting to improve, but will likely continue for at least another 18 months.
The semiconductor industry has been hit hard with shortages stemming from supply chain bottlenecks caused by the global pandemic and recent lockdowns in China. The lack of supply has been widely felt in sectors such as automotive and computer manufacturering.
“You know, we're about halfway through,” Gelsinger told Yahoo Finance Live at the World Economic Forum in Davos, Switzerland. “And my expectation now is that it persists through 2024.”
One major issue faced by chipmakers over the last six to nine months is the lack of the much needed equipment that goes into the fabs or the manufacturing plants.
“And those equipment lead times have pushed out pretty substantially over the last six months,” he said.
An increase in manufacturing in the U.S. could alleviate some of the problems in the future. Intel has “created capacity that allows us to have on the order of 10 new factories over the next five years,” Gelsinger said.
The chipmaker is prepared to produce even more capacity and is “setting up that we can do even more as we go into the second half of the decade as well,” he said. “And the Ohio and Magdeburg, Germany sites, you know, hey, you know, those are big sites that we can be 8 or 10 fabs on those locations.”
If President Joe Biden removes tariffs from China, the decision will not create a “huge difference” and is a “reasonable positive,” Gelsinger said.
“We think it's been a bit punitive,” he said. “So we think it's an incremental positive, but not a huge difference one way or the other.”
Intel said it is less concerned about inflation, but noted that a softening in demand from consumers could be a positive for the company. The demand from the business and commercial sides have been “very strong, very robust,” Gelsinger said.
“You know, a little bit of softening in demand actually gives us a bit of time to catch up and supply demand as well, which we know how hard that has been for the world to deal with the overall supply chain challenges,” he said.
There is a softening in the economy globally, especially with China's lockdowns and the war against Ukraine is impacting demand, Gelsinger said.
“I think there's going to be a period-- you know, people are fighting inflation so there's going to be a tightening of monetary policy as well,” he said. “I think these are all natural. I think there's a general softening and a general tightening of policy. You know, and we think that's probably a couple of quarters in front of us.”
Correction in Tech Sector
The slump in tech stocks is simply a correction since there was “this euphoria” from its rapid growth in market cap, Gelsinger said. Those multiples were “just unsustainable,” resulting in the major correction that has occurred, he said.
The previous growth in tech stocks was too high, but exuberance in the sector has happened in the past, Gelsinger said.
“And to a great degree, they exploded too much, right?” he said. “But we've seen that before, you know, multiples of certain segments just get ahead of themselves.”
The current correction in the tech sector is not bad since the industry still has “great growth potential.”
Gelsinger estimates that Intel’s earnings will double.
“I'm going to double the earnings of the company and we're going to double the multiple of the company,” he said. “This is a great opportunity to be part of the greatest tech turnaround story in history.”
