Auto giants such as General Motors, Ford Motor, and Hyundai Motor estimate that the global semiconductor chip shortage that has been ongoing for almost two years will ease to an extent by the second half of 2022. However, makers of chips for auto companies forecast a lengthier recovery in production and supply.
While GM CEO Mary Barra estimated a reduction in the global semiconductor shortage by the second half of the current year, Ford foresees a significant improvement in the shortage in the second-half following a first-quarter low in vehicle sales, and Hyundai predicted chip supply would return to normal levels in the third quarter of this year during their quarterly results presentations over the past two weeks.
Despite increased output, prominent automotive chipmakers such as NXP and Infineon expect a supply shortage to endure.
Different viewpoints on the auto industry’s most important issue lengthen doubts about the industry’s rebound from the coronavirus pandemic and threaten to stymie its efforts to migrate to new, chip-intensive technologies like electrification and safety and driving-assistant features.
According to analyst AlixPartners, the chip scarcity will cost the global auto sector $210 billion in sales in 2021 and result in the loss of 7.7 million vehicles.
According to the automakers, though, the tide is definitely turning.
Chip shortages are expected to continue this year before easing next year, according to Tesla, which managed chip supplies last year by building new software to accommodate changes in semiconductors.
The scarcity of semiconductors for the auto industry was not a long-term issue, according to Elon Musk, who said in an earnings call last month that factories were increasing capacity and automakers were guilty of panic buying of chips, which hampered the supply chain.
He told investors about it in no uncertain terms.
“I think there’s some degree of the toilet paper problem as well, where, you know, there was a toilet paper shortage during COVID, and like, obviously, it wasn’t really certainly a tremendous enhanced need for ass wiping. It’s just people panicked…”
Qualcomm, a semiconductor company, was upbeat.
“I do think that a lot of our peers along with us are prioritizing the auto business and shipping as much as you can,” Akash Palkhiwala, Qualcomm chief financial officer, told Reuters.
Leading automotive chipmakers, on the other hand, were less optimistic.
The supply-demand balance in some chips will improve in the second half of this year, according to Infineon, but the market for mature chips, which are critical to automakers, will remain tight.
“Supply limitations are far from over and will persist well into 2022,” Infineon CEO Reinhard Ploss said during an investor call.
Infineon is worried that the introduction of the Omicron Covid-19 variant may force China to shut down plants, reducing supplies, as part of its zero-Covid policy.
NXP also stated that the industry would not be able to overcome the supply-demand gap this year.
Semiconductor companies have an incentive to focus on the newest, most costly processors, and Apple Inc.’s Tim Cook said there were major supply constraints on “legacy nodes,” less sophisticated circuits used in power management and display devices, though supply is increasing this quarter.
“There are a couple of the fabs that are going to come online towards the end of the year that will help those markets but not fully solve the problems,” said Peter Hanbury, a partner at Bain & Company.
According to STMicroelectronics, a chip factory takes a couple of years to establish and another couple to reach full capacity. In November, the business stated that a significant expansion in capacity would not occur until 2024 or 2025.
Ford has teamed with GlobalFoundries, a U.S. chipmaker, to minimize reliance on Taiwanese chipmaker TSMC for older technology processors, which Ford CEO James Farley described as “feature-rich.”
“We’re very dependent on TSMC for our feature-rich nodes. Obviously, the capacity is at risk over time as the industry moves to more advanced nodes, including us,” Farley said during a conference call.
Ford will invest money into working with GlobalFoundries on older node chips, he added, albeit the chipmaker will need time to develop the chips in the United States.
“We have very painfully learned the lesson that we cannot manage the supply chain for these key components as we have,” he said, adding that the supply chain is critical to the transition to vehicle electrification and digitalization.
(Adapted from USNews.com)