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Ford Motor Co. and General Motors (GM) have formed partnerships with major semiconductor manufacturers to speed the end of the current chip shortage now hobbling vehicle production and ensure supplies during future disruptions.
GM has made deals with Infineon Technologies, NXP Semiconductors, ON Semiconductor Corp., Qualcomm Inc., Renasas Electronics Corp., STMicroelectronics, and Taiwan Semiconductor Manufacturing Co., GM president Mark Reuss announced on 18 November at Barclays Auto Conference.
One reason the chip shortage has hit the vehicle industry especially hard is that cars typically use a wide range of specialized chips.
Under the partnerships, GM will reduce the variety of chips its cars use by 95 percent over several years, winnowing its need to just three chip families, Reuss said.
“We see semiconductor requirements more than doubling over the next several years as the vehicles we produce become more of a technology platform,” Reuss said.
GM has pledged to build only electric cars by 2035.
Slashing the variety of specialized chips will help ensure supplies while also boosting margins, he noted.
GM’s third-quarter sales fell one-third below those of a year earlier and profits were almost halved, as the company made fewer cars due to the lack of chips, an industry-wide crisis we reported in “Auto Industry Chip Shortage Fallout” (24 Aug 2021) and other articles.
The shortage will continue into the second half of next year, GM CEO Mary Barra predicted last month.
Also on 18 November, Ford and chip maker GlobalFoundries announced a non-binding agreement to produce more chips for Ford and the auto industry more broadly but offered few details about the collaboration.
The partnership could involve devoting a greater share of GlobalFoundries’ production to Ford and conducting joint research and development for chips that will play a larger part in future vehicles, such as for use in battery management circuitry.
"We hope Ford and GlobalFoundries will team up to grow the supply in a more formal way to support our current vehicle lineup and our future needs," Ford vice-president Chuck Gray told Bloomberg.
GlobalFoundries, which is controlled by Abu Dhabi's sovereign wealth fund, will build a second U.S. chip factory in Malta, New York, the company said.
U.S. vehicle production rose 18 percent in October, following two months of falling numbers, according to U.S. Federal Reserve data published last week.
TREND FORECAST: As we said in “Global Chip Shortage Slashes Economic Outlook” (2 Nov 2021), chips will remain in short supply at least through 2022.
Production will increase, but demand will rise by at least as much, leaving the world chronically short of chips until companies can expand existing plants or build and equip new ones, a process requiring years.
As we have noted, the nations that will experience the strongest economic rebound are those that will become the most self-sufficient, producing what they need and cutting their dependence on overseas markets.
China, with its dual circulation policy, is trending in that direction, which we pointed out in the “Global Economic Trends” section of our 9 September, 2020, issue.
The newfound need to become more self-sufficient has reoriented manufacturers from a “just-in-time” inventory strategy to one of ensuring long-term supplies.
Therefore, more manufacturers will ink long-term, priority sales deals or partnerships with suppliers, including some in which a manufacturer buys a stake in a supplier.