Elon Musk says the chip shortage is a ‘short-term’ problem

Tesla Motors CEO Elon Musk speaks to the media next to its Model S.

Nora Tam | South China Morning Post | Getty Images

Tesla CEO Elon Musk said Friday that the ongoing semiconductor crisis will be over by next year.

The tech billionaire said he thinks chip shortage is a “short-term” problem as opposed to a long-term one. 

“There’s a lot of chip fabrication plants that are being built and I think we will have good capacity by next year,” Musk said at an Italian tech event that was streamed online Friday.

Musk did not specify which chip plants he was referring to.

Chip heavyweights Intel and TSMC have announced plans to build new plants in the U.S. but they won’t come online for several years yet.

Glenn O’Donnell, a vice president research director at advisory firm Forrester, believes the shortage could last until 2023.

“Because demand will remain high and supply will remain constrained, we expect this shortage to last through 2022 and into 2023,” he wrote in a blogpost in April.

The global chip shortage has had a major impact on a wide range of industries, but the automotive sector has been particularly badly hit. Big names in the industry such as Ford, Volkswagen and Daimler have all been forced to suspend production at various points and cut their manufacturing targets as a result of a lack of chips.

Impact on Tesla

During the company’s first-quarter earnings, Musk said that Tesla had some supply chain issues, before going on to reference the chip shortage. 

“This quarter, and I think we’ll continue to see that a little bit in Q2 and Q3, had some of the most difficult supply chain challenges that we’ve ever experienced in the life of Tesla and same difficulties with supply chain, with parts — over the whole range of parts. Obviously, people have heard about the chip shortage. This is a huge problem.”

Consulting firm AlixPartners predicted this week that the chip shortage will cost the automotive industry $210 billion in revenue this year alone. 

“Of course, everyone had hoped that the chip crisis would have abated more by now, but unfortunate events such as the COVID-19 lockdowns in Malaysia and continued problems elsewhere have exacerbated things,” said Mark Wakefield, global co-leader of the automotive and industrial practice at AlixPartners, in a statement.

Carmakers use semiconductors in everything from power steering and brake sensors, to entertainment systems and parking cameras. The smarter cars get, the more chips they use.

In 2019, Tesla started producing cars with custom AI chips that help on-board software make decisions in response to what’s happening on the road.

Musk said in July that production of Tesla’s Powerwall product, a backup battery for the home, was “lagging” as a result of the chip shortage.

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