Twelve months ago, most people wouldn’t have heard of semiconductors. But now they dominate the topic of conversation for car makers, with the global shortage affecting factory production at most car firms.
It couldn’t have come at a worse time, just as the car world was trying to bounce back from the effects of the pandemic. Autocar Business Live recently ran a webinar on the topic, with guests Mike Hawes, CEO of the Society of Motor Manufacturers and Traders, and Ian Henry, an industry analyst and owner of AutoAnalysis.
Why are semiconductors so important to car manufacturers?
MH “It’s almost getting to the stage of what doesn’t it do. The obvious thing is what a driver will see, in terms of the infotainment and what’s behind that. But beneath the bonnet and beneath the shell of the vehicle, they are controlling thousands of systems.
“People associate it with the shift in autonomy and connectivity that’s taking place, and it’s also about engine management and emission controls, safety systems and increasingly – as we go towards electrified vehicles – power control technologies become critical. I think the averagecar has 1400-1500 chips and some of them are up to 3000 now. If there’s a shortage, you can see how endemic that is to the vehicle, never mind the industry.”
How did we get to this point?
IH “It began a bit over a year ago when we had all the shutdowns in the industry. Car companies cut their parts ordering across their whole supply chain because they didn’t want a build-up of stock.
“Then when production volumes began to pick up and the car companies went back to their suppliers, they discovered that because everyone was working from home and buying more phones and more laptops, the chip industry had switched capacity utilisation from the auto sector to tech. I think the car industry was caught having taken its eye off the ball.”
MH “Globally, the automotive industry takes about 15% of semiconductor output, whereas personal electronics are something approaching 50%. So you can see if you’re a semiconductor manufacturer, especially in a pandemic, where’s the safest bet in terms of your customer base.
“We hope at some stage that balance is going to shift. You can’t continue to buy TVs and screens and games and new phones while we’re all in lockdown. But, undoubtedly, there’s no easy answer. And I think in the short to medium term, things could get worse before they get better.”
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Some commentators have speculated that it's the complex and custom chips that are in short supply, but that's not true. It's the simple ones because these are the specifications that can be most easilly sold into other sectors. That means its the simple functions that are becoming unavailable, such as motor control for windows and locking, logic control to switich the heated steering wheel. I've heard of cars being delivered with options like that missing where they can be dealer-fitted later, and only one key because that's an easy way to use less chips.
Good to see Ian being frank about the impact of agressive purchasing on this situation. It's noticeable that many of the worst-affected vehicle manufacturers are the ones that have the most agressive purchasing policies.
@Deputy, I think the words you picked out mean, once everyone has replaced there Tv's, Game system, cell phone etc, there not going to be replacing all of them on a yearly cycle, my last Tv lasted twelve years, it worked ok and only replaced because we'd had it a long time,and, we gave it away to be used as a game screen,so, it wasn't just scrapped in a recycle facility. The conductor shortage will sort itself out, cars are never going to get cheaper, almost at ever plate change there's new tech added that we didn't know we needed in our life, we're becoming a co-pilot, checking systems etc, no, I think building more Facilities closer to the bigger markets for cars would help.
MH states: "You can’t continue to buy TVs and screens and games and new phones while we’re all in lockdown." Is this a typo or just wrong? Not sure about you but I bought loads of stuff in lockdown delivered straight to the door!