Intel sees no let-up in components shortages

Chief executive Barrett sees up to 18 months of drought for mobile phone and PC industries
Written by Will Knight, Contributor

Widespread shortages in PC and mobile phone components will continue for another year or even a year and a half, predicted Intel chief executive Craig Barrett at a round table meeting in Stockholm this week.

Barrett said an underestimation of demand as well as underinvestment in the industry will be responsible for the scarcity. "There will be a continued shortage in critical companies," he said. "I would not be surprised to see a shortage in the industry over the next six to 12 months or even 18 months."

Barrett said that this was due to "rather inaccurate forecasts of the projected growth in most of the computer industry and in the cell phone industry," adding that "both of those have exceeded expectations of growth in the past year and that's added to the lack of investment.

"The only cure to this is more capital investment," Barrett said.

Shortages have been noticed for the past few months as demand for high-tech consumer products has boomed, with companies such as Solectron, a major contract manufacturer for companies such as Cisco and Lucent reporting tight supplies.

Motorola, Dell, Gateway and other tech giants have had problems and even corporate IT departments are being made uncomfortable.

Barrett himself said a month ago that the future for semiconductor supplies looked grim. Since then Intel has made major infrastructure investments, but Barrett's comments, made at an industry event Tuesday, show the picture has not changed.

For consumers these shortages are not good news according to Gartner Group research analyst Michael Dornan. "When they say this it usually means that prices won't be dropping and they haven't been for a while," he said.

Dornan also believes there is little sign of demand for PCs abating. "There still seems to be quite a number of consumers who want a PC and haven't got one. In France and the UK 50 percent of those buying PCs are first time buyers."

Operations director at UK manufacturer Evesham.com, Luke Ireland, confirms that the industry is starting to feel a pinch. "One of the biggest issues at the moment is Intel microprocessors but I believe that discrete items such as resistors and capacitors are starting to get short in Taiwan," he commented.

But Barrett is convinced that Intel and others are ploughing sufficient investment into the industry to eventually remedy the situation. "We've increased our commitment this year to about $6bn. We've just announced in Ireland another a $2bn factory. I think you're going to see more investment of this sort."

See to Chips Central for daily hardware news, including an interactive timeline of AMD and Intel's new product launches through Q1 2001.

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