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Chipmakers Scold Automakers on Chip Shortage, Tell Them to Get With the Times
It seems a bit of a conundrum. Cars, while they’re among the most expensive consumer goods in the world, also happen to depend on the cheapest possible semiconductor chips to operate.

Chipmakers Scold Automakers on Chip Shortage, Tell Them to Get With the Times

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The first warning signs of a chip supply shortage came at the end of 2020, but the supply chain glitch was only supposed to interrupt car production for a minute as chipmakers focused production on automakers. While the lead time for chips was generally around six months - such circuitry on standard silicon substrates involves long production steps that require a series of weeks - that was the industry standard.

But as the health crisis slammed world markets hard, production of big-ticket consumer items took a back seat and new car production was shoved onto the back burner as home-focused devices like phones and televisions took precedence, with people searching for ways to weather lockdown conditions.

As car markets suddenly found a foothold months later and consumers began to regain their confidence, chipmakers who had already shifted their capacity to other locations were found wanting when automakers came to call once again.

But in the interim, it was suddenly apparent that Moore’s Law of increasing miniaturization missed the boat when it came to the automotive industry. The many dozens of chips in structures from brake systems to airbag controls were revealed as chokepoints where obsolete technologies reigned supreme. The essentially ancient chips, comparatively simple transistors for the day, are far too primitive to be used in high-tech devices such as today’s smartphones and televisions.

Now that these dinosaurs of processor technology are in scarce supply, chipmakers are jumping on the bandwagon to scold car companies to upgrade with the times.

“I’ll make them as many Intel (old) chips as they want,” Intel chief executive Pat Gelsinger told Fortune. “It just makes no economic or strategic sense. Rather than spending billions on new ‘old’ fabs, let’s spend millions to help migrate designs to modern ones. A lot of it just has to do with the fact that these are proven designs.”

Carmakers have pushed for additional production of such old-school semiconductors, but chipmakers are pushing back hard.

Under relentless pressure from carmakers to drive prices down from suppliers, such cheap and outmoded processors have become nothing less than bulk commodity products.

The issue is that reliability is of enormous concern to automakers. The vast majority of chip-dependent systems in cars are crucial to their safety, and those chips are required to perform at peak efficiency without regard to conditions such as temperature, humidity, microscopic dirt and hellish vibration.

But chipmakers like Qualcomm are in a quandary as they can’t easily invest in ramping up capacity. The U.S.-based company is what’s known as a ‘fab-less chipmaker.’ In simple terms, it means that Qualcomm uses contract manufacturers - called appropriately enough ‘foundries’ - to build those outmoded semiconductors.

Enrico Salvatori, president of Qualcomm Europe, said new chip technologies aren’t “plug and play” compatible, and that need to redesign circuits and build new boards means they’d need to be recertified. And that process is complicated indeed.

Foundries suffered from a variety of challenges like power blackouts at Texas plants and a fire in March at key Japanese supplier Renesas. The resulting bottleneck means that as many as 9.4 million cars (or ten percent of the chipmakers pre-pandemic output) were wiped out of production plans.

“Because of a 50-cent chip, we are unable to build a car that sells for $50,000,” said Murat Aksel, head of procurement for Volkswagen Group.

But the current issues are likely to mean that one major problem will be solved despite automaker’s inclinations - the major players in car manufacturing will be forced to join the modern era as they enforce a march forward toward pressures dictated by Moore’s Law.

 
 
 
 
 

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