The shortage of computer chips plaguing industries around the world and helping to fuel inflation could last another two years, the boss of IBM has said.

With the global car industry estimated to lose $110bn this year thanks to the chip shortage, IBM’s president, Jim Whitehurst, told the BBC on Friday that the tech industry was struggling to keep up with demand brought on by the reopening of the world economy.

Some factories were forced to close when the pandemic first struck in 2020. The backlog in production was compounded by soaring demand for chips from a boom in sales of laptops, game consoles and mobile phones as people were forced into lockdown.

“There’s just a big lag between from when a technology is developed and when [a fabrication plant] goes into construction and when chips come out,” Whitehurst told BBC world business news.

“So frankly, we are looking at couple of years … before we get enough incremental capacity online to alleviate all aspects of the chip shortage.”

He said the industry might have to consider changes to the way microchips were used.

“We’re going to have to look at reusing, extending the life of certain types of computing technologies, as well as accelerating investment in these [fabricating plants], to be able to as quickly as possible get more capacity online,” he said.

Many carmakers cancelled orders for chips in 2020 when they mothballed factories in the pandemic but have been caught out as demand has roared back more quickly than anticipated.

The consulting firm AlixPartners said on Friday that the crisis will hit the production of 3.9m vehicles this year, pushing the cost to the industry to $110bn from an earlier forecast of $61bn.

Automakers are now looking at developing direct relationships with semiconductor makers, said Mark Wakefield, co-leader of AlixPartners’ global automotive practice.
“These things are shocked into existence,” he said.

Ford has halved production of vehicles through to June this year because of the crisis and said on Thursday that it was redesigning automotive components to use more accessible chips.

Jim Farley, speaking at Ford’s online annual shareholder meeting, said it was weighing other strategies for the future, including building a buffer supply of chips and signing deals directly with factories that make the wafers used in semiconductors.

The chip shortage has caused automakers globally to curtail production. Last month, Ford said the issue would cost it $2.5bn this year and halve its vehicle production in the second quarter, when the shortage would be at its worst. The shortage has forced Ford at times to idle production of its highly profitable F-150 pickup trucks.

The loss of production has pushed up prices. Around one-third of the shock 4.2{3c6be4297db6c6dead22aac82e61edad92a520b73a55778b8446ff6b78406501} increase in US inflation this week was down to higher car and truck prices.

“Inflationary pressures are building because of the reopening of the economy, supply chain issues and a global semiconductor shortage,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania.

The shortages have also affected industries such as the manufacture of household appliances from washing machines to toothbrushes that rely on both memory and processing chips.

Samsung, which leads the manufacture of memory chips, has said production of televisions and other appliances would be affected by the shortages.

The manufacturing of higher-end processing chips is dominated by Taiwan with 92{3c6be4297db6c6dead22aac82e61edad92a520b73a55778b8446ff6b78406501} of the world’s most advanced semiconductors made by Taiwan Semoconductor, also known as TSMC.

Reuters contributed to this report.