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Optical/IP

Chip shortages spread into telecom

It was only a matter of time.

A shortfall in the global supply of chipsets that has been affecting technology industries ranging from automotive to video games has now expanded directly into the telecom industry.

Optical networking company Infinera said the situation could cost it up to $10 million over the next three months.

During the company's earnings call with analysts, Infinera CEO David Heard said the company expects to score between $320 million and $340 million in revenue in its upcoming quarter, but those figures include a $10 million risk due to "semiconductor shortages that are not unique to our industry."

"We are actively working every single day to mitigate that risk," explained CFO Nancy Erba, according to a Seeking Alpha transcript of the event. "Teams are working really hard to do that. So we've got it built into our outlook, and we're doing our best to mitigate it."

Infinera is one of the world's leading providers of silicon and technology for core telecom networking. The company's products generally sit inside the fiber networks that crisscross the world, carrying the bulk of the Internet's traffic.

Thus, it's likely that Infinera won't be the only company in the telecom industry to feel the effects of the chipset shortage.

Already the situation has cost the global auto industry more than $60 billion in revenue this year, according to CNBC.

Partly in response, President Biden is planning to issue an executive order in the coming days designed to increase the domestic production of silicon for applications ranging from power steering to 5G. Such a move may not alleviate the current shortage but could short up the supply of silicon for US companies by increasing the domestic production of chipsets.

After all, the US share of global semiconductor manufacturing "has steadily declined from 37% in 1990 to 12% today," warned the US Semiconductor Industry Association (SIA) – whose members include telecom companies like Qualcomm – in a recent letter to Biden. "This is largely because the governments of our global competitors offer significant incentives and subsidies to attract new semiconductor manufacturing facilities, while the US does not."

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Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano

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