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IBM CEO Arvind Krishna: Chip Shortage ‘More Likely’ Continuing Until 2023 Or 2024

Krishna said he sees any suggestion that a resolution could come by 2022 as ‘optimistic,’ and called upon the U.S. government to do more to support a larger return of semiconductor manufacturing to the country.

IBM CEO Arvind Krishna believes that any prediction of a resolution to the industry-wide semiconductor shortage by 2022 is overly optimistic, saying he sees it “more likely” that the issue won’t be fully solved until 2023 or 2024.

While IBM no longer manufactures its own chips, the company does continue to do R&D work on semiconductors that other companies can learn from and use in their own chips, Krishna said Monday at the 2021 Best of Breed (BoB) Conference in Atlanta, hosted by CRN parent The Channel Company. Krishna took questions from Robert Faletra, executive chairman of The Channel Company, and Steven Burke, editor news at CRN.

[Related: ‘Geographically Diversify Manufacturing’ To Solve Supply Chain Crisis: Analyst]

IBM’s work has included “breakthrough” research in semiconductors at the company’s lab in Albany, N.Y., Krishna said. In May, IBM announced it had developed what it’s calling the first chip featuring 2-nanometer nanosheet technology.

IBM has been affected by the chip shortage in terms of its server and storage businesses, including “massive” shortages for high-end servers and a hit to its available storage supply of as much as 30 percent, Krishna said.

Earlier at the Best of Breed conference on Monday, Daniel Newman, founding partner and principal analyst at Futurum Research, said he believes late 2022 could be when semiconductor supply is greater than semiconductor demand.

Krishna said he sees this as unlikely.

“I actually think that they’re being optimistic to think it will be solved by the end of ‘22,” Krishna said. “By the end of ‘22, [it will be solved] only if the demand falls.”

Ultimately, he said that the problems could persist even past the 2023 timeframe that Intel CEO Pat Gelsinger has previously pointed to.

“I think it’s more likely in ‘23 or ‘24” that the semiconductor issue is solved, Krishna said.

The industry-wide constraints are a combination of surging demand for connected devices, shortages on components such as semiconductors and severe disruption in the supply chain, including massive congestion in major ports.

The specter of continued shortages also looms large as Taiwan, where a significant amount of semiconductor production is located, faces increased pressure from China to re-unify.

Solution providers who spoke with CRN at the Best of Breed Conference said they agree with Krishna’s assessment that the semiconductor shortage could extend into 2023 or 2024.

“I would trust the IBM perspective. Because he’s dug into this beyond the stuff that’s on the surface. [Krishna] knows something,” said Zac Paulson, CEO of Fargo, N.D.-based solution provider TrueIT. “I do tend to think it’s going to be longer than 2022.”

Suggestions about the issue being resolved in 2022 do seem optimistic, said Travis Woods, CEO of San Francisco-based Fort Point IT.

At IBM, “they’re planning things years out. There’s no way they aren’t aware,” Woods said. “And honestly this doesn’t surprise me at all. Because anytime you have this kind of chain reaction where all these problems happen, even if you start fixing the root cause, you’re talking two to three years.”

In terms of Krishna’s prediction of a resolution more likely coming in 2023 or 2024, “I think he’s spot on,” Woods said.

To fully solve the issue, Krishna said he believes it’s crucial to bring more semiconductor manufacturing to the U.S.

“I believe it’s essential to get from 20 [percent] up to probably 30, 40, 50 percent on-shore capacity,” he said.

That poses a challenge, however, because of the high costs of labor for manufacturing in the U.S., with typical manufacturing workers—not just engineers—making $60 to $100 an hour, Krishna said.

Government subsidies for semiconductor manufacturing in East Asia have also been generous, he said. More help from the government for semiconductor manufacturing in the U.S. is “what has to happen here,” Krishna said, adding that he hopes to see the full Congress pass a new bill with implications for the nation’s semiconductor industry. The Senate passed the U.S. Innovation and Competition Act in June, which reportedly contains $52 billion in funding for research, design and manufacturing of semiconductors.

Mark Wyllie, CEO of Flagship Solutions Group, a Boca Raton, Fla.-based IBM Gold Business Partner, said that Krishna’s argument for bringing more semiconductor manufacturing back to the U.S. makes sense.

“I think it probably has to” return to the U.S. in a larger way, Wyllie said. “There’s critical technology that we need to have, and chips are pretty much the brains of all of that. You don’t want to have so much of that production done somewhere else, and next to a country that’s not really very friendly with us anymore.”

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