BEIJING, Aug. 4 (Xinhua) — A shortage of chips has forced global automakers to abandon production plans for millions of vehicles over the past two years. The situation is easing, but auto companies are paying a new and permanent price. Executives from both industries said that how to solve the chip shortage has now become a must-think point in automotive development. This shifts the risk and some of the cost from the chip companies to the automakers.
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Newly formed teams at auto giants such as GM, Volkswagen and Ford are negotiating directly with chip companies; Nissan and other auto companies are being forced to accept longer order cycles and higher inventories; major suppliers to the auto industry, including Bosch and Denso, are also beginning to invest in chip production; GM and Stellantis have also said they will work with chip designers to design components.
Industry executives and analysts believe that, in general, these changes represent a fundamental shift in the automotive industry: higher costs, more involvement in chip development efforts, and more capital invested in exchange for a more stable supply of chips. For automotive companies that used to rely on suppliers, and suppliers of suppliers to ensure chip supply, this is a 180-degree turn.
For chipmakers, the still-developing partnership with automotive companies is welcome, and the relationship is long overdue for reinvention. Many chip company executives pointed out that in the recent supply chain crisis, a large part of the reason is the lack of understanding of the chip industry supply chain operation of the automotive manufacturers, but also unwilling to share the cost and risk.
At present, the automotive industry seems to have passed the most severe period of the crisis. It is estimated that the crisis has led to a reduction in global car production of 13 million units since the beginning of 2021.
TSMC CEO Chia-Chia Wei said that no auto industry executives ever contacted him until the chip shortage went to a desperate point. At a recent TSMC partner and customer conference in Silicon Valley, he said, “For the past two years, they’ve called me and acted like they were my best friends.” He revealed that an auto manufacturer called to urgently book 25 wafers of chips, but TSMC often receives orders starting at 25,000 wafers. So, “it’s no wonder you don’t get support.”
Thomas Caulfield, chief executive officer of another chip foundry giant, GeChip (GlobalFoundries), said the auto industry has learned that it can no longer leave the risk of building multibillion-dollar chip factories entirely to chip companies. “You can’t have one element of the industry providing water for the rest of the industry. We’re not going to put in capacity unless the customer provides a commitment and is willing to take ownership of that capacity.”
Ford has already announced a partnership with Gracore to secure chip supply. Mike Hogan, head of the automotive industry for Gecko, said he is in talks with other auto companies about more such partnerships.
Thomas Sonderman, chief executive of Minnesota chipmaker SkyWater Technology, said the company is in talks with auto companies to “stay out of the way” by purchasing equipment or paying for research and development.
Onsemi CEO Hassane El-Khoury said closer cooperation with automakers and their suppliers has led to a $4 billion long-term deal for the company to produce silicon carbide-based power management chips. Such new materials are growing in popularity. We invest billions of dollars every year to scale our business,” he said. But we’re not going to build a plant just because we see promise.”
Synaptics CEO Michael Hurlston said the recent more direct collaboration with automakers could lead to new business opportunities while helping to manage risk. synaptics’ chips are used to drive touchscreens, and a shortage of the company’s chips is also affecting car production.
Helston said the automotive industry has begun to embrace OLED screens, even though such screens are not as durable as LCDs. Previously, despite the better contrast and lower power consumption of OLED screens, durability affected the automotive industry’s interest in the technology. “In the last two years, however, their views have changed significantly. This is the result of our direct dialogue with the automotive industry. For us, the industry paradigm has really changed.”
The chief executives of Renesas Electronics of Japan and NXP Semiconductors of the Netherlands both said they are arranging for engineers to assist automotive companies in designing new architectures to control all the functions of a car with a single computer. NXP CEO Kurt Sievers (Kurt Sievers) said, “They have awakened. They understand how much it costs. They’re starting to try to find the right people. It’s a big shift.”
According to market research firm Gartner, the average chip content per vehicle will exceed $1,000 by 2026, double that of the first year of the outbreak. The electric Porsche Taycan, for example, currently uses more than 8,000 chips, and the VW Group says that number will double or triple by the end of this decade.
We have understood that we are part of the chip industry ourselves,” said Berthold Hellenthal, VW Group’s senior manager for chip management. We now have people set up for strategic chip management.”
Evangelos Simoudis, a Silicon Valley investor and consultant who has worked with both established automakers and startups, said recruiting and retaining chip engineers will be a challenge for automakers, which will need to compete with technology companies such as Google, Amazon and Apple. “This will lead to acquisitions.”
He also noted that unlike Tesla, which designs its own core chips, traditional automakers will have to continue producing traditional models while making new investments.
AutoForecast Solutions estimates that the chip shortage has forced automakers around the world to cut production plans for more than 13 million vehicles since the beginning of 2021. “It’s a very arrogant industry,” said Sam Fiorani, the company’s vice president for global vehicle production forecasting.
