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Expect 'tough' quarters ahead as chipmakers look to catch up with auto sector demand, Credit Suisse says

Expect 'tough' quarters ahead as chipmakers look to catch up with auto sector demand, Credit Suisse says

1/27/2021 12:46:00 PM

Expect 'tough' quarters ahead as chipmakers look to catch up with auto sector demand, Credit Suisse says

It will take months for chipmakers to catch up with a shortfall in supply for the auto sector, predicts Credit Suisse's Randy Abrams.

Abrams' comments came as automakers globally are shutting assembly lines due to problems in the delivery of semiconductors,according to Reuters.The current shortage comes as chipmakers scaled down production around the middle of last year as customers cut back orders, Abrams explained. He added that the shortfall in chips for the auto sector has created a bottleneck whereby vehicles cannot be built due to the lack of certain components.

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"I do think by middle of the year, we should be starting to catch up," he said, but warned it'll be "a tough couple of quarters catching up to those orders."Taiwan Semiconductor Manufacturing Company, the world's leading foundry, is among the companies still trying to catch up with the increased demand.

Reuters reported Monday that TSMC will prioritize production of auto chips if the firm is able to further increase capacity. The report cited Taiwan's Economics Ministry.For the first time in a long time, semiconductors are limiting auto production. headtopics.com

Randy AbramsHead of Taiwan Research, Credit SuisseThe Covid-19 pandemic upended nearly every industry in the world as businesses and economies were forced to shut down due to the lockdowns, triggering supply chain problems and widespread job losses.The auto industry was not spared, with Boston Consulting Group

that sales in Europe and the U.S. "will not rebound to pre-COVID levels until 2023 at the earliest."Lack of advanced chipmakersThe shortage highlights the "strategic importance" of chips, Abrams said."For the first time in a long time, semiconductors are limiting auto production," he added.

Beyond the automotive industry, those challenges are also seen in other sectors such as cloud computing and artificial intelligence, he said.There are now less manufacturers capable of making more advanced chips compared to previous upturns in the sector, the Credit Suisse analyst said, citing Samsung Electronics and

Intelas the other two "advanced manufacturers" with such capabilities."It's a reality the industry is having to deal with — it's becoming more complicated to make advanced chips," Abrams said. Read more: CNBC »

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