The ongoing global chip shortage needs to be closely monitored and supply chain visibility is not as good as it used to be, Nokia President and CEO Pekka Lundmark told CNBC.
Lundmark, who took over Nokia ‘s main role in September, told CNBC’ s “Squawk Box Europe” on Friday that the chip market is “tight” at the moment.
“It’s not just telecoms. It’s automated, it’s consumer devices, it’s the IOT (internet of things) devices that are emerging. , “he said. “The entire semiconductor industry is very busy finding ways to increase capacity.”
Chips are used to power cars, phones, high-performance computers, security systems, AI applications and many other things.
The cost-conscious car industry has been severely affected by the shortage of chips as it uses chipsets from everything from power management and brake sensors, to entertainment systems and parking cameras. The faster the cars get, the more chips they use.
Several manufacturers including GM, Honda, and Ford have been forced to cut production.
However, Nokia itself has not been adversely affected. “We don’t see any real shortages,” Lundmark said. “The situation is manageable, but this is an issue that needs constant attention.”
He said the medium- or long-term visibility on chip supply is not as good as it used to be.
The Finnish company uses chips in their network equipment and smartphones, but they do not make them themselves.
The largest manufacturers in the world are TSMC Taiwan, SMIC China, and Samsung South Korea. However, Samsung and TSMC are the only two companies in the world capable of manufacturing the 5 nanometer chips.
One of the reasons there are so few 5nm chip manufacturing plants is because they are expensive. Building something so small requires high-tech equipment that is not cheap.
According to the Semiconductor Industry Association, a consortium backed by several chip manufacturers, the U.S. only accounts for about 12.5% of semiconductor manufacturing. Europe accounts for less than 10% of global production, up from 6% five years ago. The European Commission, the EU’s executive arm, wants to boost that number to 20% and is monitoring an investment of 20-30 billion euros ($ 24-36 billion) until it happens.
Countries are now looking to finance new chip plants as part of an effort to resolve supply issues. President Joe Biden signed an order of action on Feb. 24 aimed at addressing the chip shortage through scrutiny.