Jean-Marc Chery: “The chip crisis will last until 2023 impossible to increase production”

“The semiconductor crisis will last until 2023. Increasing production is not possible now.” This is the warning to the industry suffering from the shortage of microchips that launches Jean-Marc Chery, number one of the largest electronics group, STMicroelectronics with Italian and French state-owned shareholdings, which for 2021 expects net revenues of around 12.6 billion dollars, up 23.3%. The recovery has caused demand for chips to explode, + 35% globally in 2021, making it difficult to keep up with the pace and sending entire sectors short of supplies into difficulty. When will the commodity crisis end?

“The situation is extremely complex. And I think it can be said that even in 2022 the production capacity will not be up to the demand. Let’s take the automotive sector. Even beyond electrification, the segment will demand more electronics. In addition, we too are seeing a shortage of the most varied materials. And then there is the logistical question, which has many problems ». So will the industry suffer for at least another year?

«Normality will not return until 2023. The challenge is complicated. Market dynamics will need to be monitored every month. Some customers, for example, are already placing orders for 2023. But it is too early to say precisely when it will end ». Are there currently bottlenecks in your supply chain?

“I don’t know if we can talk about real bottlenecks. Our industry until the outbreak of the pandemic was organized very efficiently if we consider that it incurs very high costs for investments and research and development, only STM spends around 15% of revenues, but most of the microchips reach the customer for less than a dollar. The boom in demand has shown that the model of integrated producers like us is more flexible than others, so much so that our revenues have grown by 23%. In other words, we were able to put a greater capacity on the track quickly. Well, if we want to talk about nodes, producing microchips is a process that requires a lot of programming ». What times are we talking about?

«When the design of a microchip arrives at the factory, the processing takes from three months for the simpler ones to five months and beyond for the more complex ones. The substrates on which we build the chips, that is, very thin slices of silicon, are subjected to an average of 500 operations passing from one machine to another. Some of these chemical and physical processes take up to 20 hours. Eventually the “slices” leave for a second type of plant traditionally located in countries with a lower labor cost, where each chip is boxed. When the chip is finished and ready to go to reach the customer’s plant, it has dimensions of just a few millimeters, so it is possible to understand that dimensions that are invisible to the naked eye or under the microscope have the previous processes ». So, in the short term, isn’t increasing production a viable solution?

«The plants of the semiconductor industry work seven days a week, 24 hours a day, 360 days a year, to amortize the costs of machines of several million euros. So increasing the capacity quickly isn’t easy. In the medium, you can buy new machines if you have the equipped space in which to insert them. This is what we have done and will do to cope with the boom in demand. But building an environment to produce microchips from scratch takes years ”. Will the difficulties in answering the question affect consumption during the Christmas gift period? Will it be difficult to find electronic products?

“The consumer electronics industry has suffered less than others from the lockdowns of the past two years. It has maintained a very strong demand from those forced to stay indoors to live and work. The industry may have had to make choices about which products to launch first. Today the entire supply chain is challenged by problems of logistics, access to basic materials and energy supplies ».
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