The production shortage plaguing the market for automotive chips is a combination of new and old problems, none of which can be easily solved.
Ford Motor last week was the latest auto maker to show the fallout. The company said Thursday that it is cutting production by up to 20% in the first quarter due to its inability to procure enough chips. Rival General Motors said a day earlier that it planned to trim production at North American factories due to the shortage. Volkswagen sounded an early warning in December about the issue, which is affecting auto makers across the board that need chips to control everything from infotainment systems to power management to systems monitoring.
The problem stems from actions both recent and distant. A sudden drop-off in sales caused auto manufacturers to cut component orders early in the pandemic. Then demand rebounded at an unfortunate time as chip manufacturers were operating at capacity to produce components for hot, high-price items such as the latest generation of iPhones and artificial intelligence chips for data centers. Industry giant Taiwan Semiconductor Manufacturing , or TSMC, said in its earnings call last month that the automotive market accounted for only 3% of its revenue in the fourth quarter compared with 51% for smartphones and 31% for high-performance computing chips.
The firm said on the same call that improving production for auto chips is a “top priority.” But the harsh reality is that chips for cars have to compete for manufacturing space with other products that generate a much higher return. Nvidia , a major TSMC customer, sells some of its latest gaming processors for several hundred dollars apiece, whereas many of the microcontrollers used in the world’s automobiles can fetch a dollar or less. Even cheap chips can have expensive consequences, though. Stephen Sanghi, chief executive of auto chip supplier Microchip Technology , noted in his own call last week that “a $1 part can prevent a $40,000 car from shipping.”
Chip fabrication plants generally take more than two years to set up and the soaring cost of building and equipping them has led more semiconductor companies to outsource more of their production needs. Renesas, NXP and Infineon -Cypress, which together account for nearly 80% of the automotive chip market, all use TSMC for some of their manufacturing. The Taiwanese firm now produces about 70% of the microcontroller units used in the world’s automobiles, estimates Phil Amsrud of IHS Markit .
The Link LonkFebruary 09, 2021 at 10:14PM
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No Quick Fix for Auto Chip Shortage - The Wall Street Journal
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