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UK engineer Renishaw expects chip crunch to last another 2 years

The British engineering firm Renishaw expects the semiconductor shortage that has wreaked havoc on global manufacturers to continue for another two years as the chip manufacturing supplier plans to expand its workforce to meet the growing demand.

The FTSE 250 group, which manufactures precision measuring equipment used by the electronics, automotive and aerospace industries, overcame supply chain problems that confused many industries to take advantage of strong semiconductor demand and post record earnings in the first half of this week. Renishaw uses chips in its own products, but is more important as a supplier of machine parts for semiconductor systems, and supplies encoders that enable precision manufacturing to nanometers.

Will Lee, Renishaw’s CEO, said strong investments from chip manufacturers to increase production are likely to continue with years of tight supply ahead of the vital electronic components vital to the automotive, appliances and medical devices.

“The talk is about supply challenges that continue for a few more years,” he told the Financial Times. “It’s interesting in terms of demand. Faberne [semiconductor fabrication plants] we deliver to are very complicated and sophisticated facilities. ”

The semiconductor industry is a cyclical industry that fluctuates between overcapacity and undersupply, but Lee said these booms were evolving. “It feels like this is going to be an investment wave that goes on for some time… Every time these waves get longer and stronger and the baseline is higher,” he said.

Major semiconductor manufacturers have said that there is no quick end to the supply problems in sight. In October, Arvind Krishna, IBM’s CEO, said supply shortages would “more likely” continue into 2023 or 2024, while Taiwan Semiconductor Manufacturing Company, the world’s largest contract chip maker, is investing up to $ 44 billion this year to boost production.

An increase in industrial automation and the recovery of machine tool costs also helped Renishaw almost double its pre-tax profit to £ 84m. on a turnover of £ 325 million. in the six months to the end of December.

However, some analysts are skeptical of a lasting boom in industrial investment that would benefit Renishaw. Sanjay Jha of Panmure Gordon raised its full-year revenue and profit forecasts for the company in 2022, but lowered them for the following year, arguing that the semiconductor equipment sector is still “very cyclical” and that higher pandemic spending on electronics is likely to relax. .

Renishaw, which has retained most of its workforce in the UK, has expanded to nearly 5,000 employees to keep up with demand, reversing cuts made before and at the start of the pandemic. This year, it is planned to hire a record 180 graduates and apprentices as well as experienced engineers to develop new products and commercial strategies.

Octogenarian founders Sir David McMurtry and John Deer put the Gloucestershire-based business up for sale last year on terms that effectively ruled out private equity ownership amid a flurry of acquisitions of UK-listed groups. The majority shareholders subsequently completed the process after not finding any suitable stewards for the company.

The lack of clarity about future ownership has weighed on the shares, which reached a maximum of £ 69 in March last year but have fallen lower since trading at around £ 48.

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