May 18, 2021
AT&T hosted an event Tuesday designed to highlight its concerns over the ongoing global chipset shortage and how the situation might impact the company's connectivity business, including its fiber and 5G network buildouts.
AT&T's ultimate goal is to generate support among lawmakers for domestic chipset production and suppliers. The company warned that the global construction of silicon is primarily done by a handful of foreign companies in mostly Asian countries – which could create supply constraints for US companies like AT&T.
"This is a harder problem than many people realize," Susan Johnson, EVP of global connections and supply chain for AT&T, explained in a presentation.
Johnson estimated that the overall Information and communications technology (ICT) industry, which stretches from mobile phones to 5G networks, is responsible for roughly half of all semiconductor sales. As a result, AT&T closely tracks supply chain issues that might affect the sale of phones or the supply of equipment for its network.
"We are huge buyers of semiconductors," she said during an online event hosted by AT&T's Policy Forum, which is designed to "cultivate an open exchange of ideas" about policy issues affecting the company.
A look at the problem
Johnson explained that the global supply chain for semiconductors can be affected by a wide range of issues, from earthquakes to geopolitical machinations. But she said this year's shortages are unique in that they stem from a confluence of events – from Huawei's chipset stockpiling to droughts in Taiwan – and have been exacerbated by a pandemic driving everyone online.
"The demand for chips is not slowing down," she said.
The reason US policymakers need to be concerned, Johnson said, is twofold: Fully 75% of chipset manufacturing is done in East Asian countries, and Samsung and TSMC account for 70% of all chip manufacturing operations. This kind of concentration makes the supply of chips even more tenuous.
"This is a major concern," she said.
Johnson praised announcements by Intel, Samsung and others to beef up their chipset production efforts in the US, as well as the passage of the CHIPS for America Act by Congress, which is intended to encourage domestic semiconductor manufacturing incentives and research initiatives. However, Congress has not yet allocated the $50 billion for that effort that AT&T and others are looking for.
AT&T isn't alone
AT&T's event Tuesday is part of a broader effort by the company and its peers to raise awareness on the chipset issue. Indeed, AT&T, Verizon and other tech companies recently created the Semiconductors in America Coalition (SIAC) to "advance federal policies that promote semiconductor manufacturing and research in the US to strengthen America's economy, national security and critical infrastructure."
Johnson didn't provide any financial details of how the chipset shortage might be affecting AT&T, but company CEO John Stankey recently warned investors it could become an issue. "I'm a little skittish," Stankey said of the shortages. "It is possible that we could see certain element shortages ... That's why I want to be a little bit cautious."
Indeed, companies in the telecom industry that have said they will lose money due to the shortages include Apple, Infinera, Neophotonics and Samsung.
"The US must increase its ability to produce 5G hardware, software and services domestically. Policies should target advanced capability and capacity to manufacture 5G hardware and software, and services to develop 5G architecture and assemble component parts," warned consulting firm Booz Allen Hamilton in a recent report on 5G.
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