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Why Intel’s new plant won’t end the chip shortage overnight

Yahoo Finance's Dan Howley joins the Live show to discuss why Intel's new plant won't end the chip shortage overnight, the chip shortage outlook, and inflation.

Video transcript

JOE BIDEN: During this pandemic, your pocketbook felt the consequences-- inflation, higher prices. Whenever a factory shuts down in one part of the world, the production and shipments of goods to shops, and homes, and business all over the world gets disrupted. COVID-19 has compounded that problem many times over, especially with these computer chips.

As a result, everything from cars to dishwashers are delayed getting to showrooms and customers, just as demand for them is up because the economy is growing. And because supply is low-- because supply is low, we find ourselves in a position that we're really behind the curve. Prices are going up.

AKIKO FUJITA: President Biden at the White House discussing the chip shortage and the challenges earlier today. This coming as we got a big announcement from Intel and we're seeing shares popping, up more than 1% after the company announced it's investing at least $20 billion into a chip-making facility in Ohio. But how big of an impact will this have on the broader chip shortage?

Yahoo Finance's Dan Howley joining us now as part of our Tech Support segment presented by Verizon. We've seen a doubling down here from Intel CEO Pat Gelsinger. We're talking about two factories in Ohio, two already reported in Arizona. How big of a dent can they make?

DAN HOWLEY: Well, yeah, this is $20 billion on two different factories. As you said, there's two other factories in Arizona. It's not just Intel that's making factories in the US, by the way. We have Samsung and GlobalFoundries-- sorry, Samsung and Texas Instruments making factories in Texas. We have GlobalFoundries making a plant in upstate New York. We have Micron expected to build a plant in Texas.

So a lot of companies are going to be building these factories. So that means we should be awash in microprocessors, right? We should be able to find them on our floors, kind of like LEGOs that we step on in the middle of the night. We're just going to be awash in them.

But the reality is that's not what's going to happen. In fact, if you look at Intel's own press release, the factory that we're talking about here won't be operational until 2025. So this chip shortage, meaning, you know, everything from cars, to video games, to computers graphics cards is not going to be over overnight. And that means that we're still going to have problems getting some of these products.

And as President Biden pointed out, that's partially driving some of the inflation that we're seeing, especially around cars and electronics. And I just want to give you an understanding as to why this doesn't mean that we're going to see an end to the chip shortage overnight. And really, it's because, one, as I said, this factory will not be built until 2025 where we'll start to see chips come off the assembly line.

The other factories as well that I mentioned will not be ready any time this year, or some of them won't even be ready by 2025 because they're not even ready to be built. The other thing is that when you build these kinds of factories, they have to be in a place that's basically away from any kind of seismic activity. They need to be incredibly safe and secure, because if there's any kind of shaking or rumbling with the building when the chips themselves are actually being built, it can screw up an entire wafer of chips.

And then speaking of those chips themselves, it can take up to six months to build a processor. That's six months for one wafer. So really, these chips take a long time to build. And I know we kind of take them for granted-- you know, we get in our car, we get Siri going, or, you know, our Google Play, or we power up our computers, or our game consoles, or we turn on, you know, Christmas lights last month-- hopefully you still have Christmas lights up in the middle of January-- but really, you know this is something that's going to continue to be an issue.

So my suggestion is if you're looking for products that require these kinds of chips, the ones that are in short supply, maybe see if you can hold off a little bit longer on making purchases, especially if it's high end things like graphics cards, or game consoles, or vehicles. Because the prices are still going to be inflated. If they're not inflated, then they're still going to be hard to buy.

And yes, it's good news that we're seeing these factories being built. Obviously, it's an issue that has needed to be addressed. But it doesn't mean the chip shortage is going to end overnight.

AKIKO FUJITA: Yeah. And President Biden pretty clear in sort of calling for patience, saying this is not a two-year plan. We're talking about a 10-year, 20-year plan to reduce reliance on non-US manufacturers. Thanks so much for that, Dan.

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