Top Chipmaker Explains What Car Companies Did Wrong Before the Shortage

Carmakers often suspended their production due to the lack of chips 6 photos
Photo: General Motors
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The chip shortage was, still is, and will probably continue to be a major headache for car manufacturers worldwide, with more and more analysts expecting the constrained inventory to remain a problem through 2023.
And while carmakers are working non-stop on ways to reduce the disruptions caused to their production operations, chip manufacturers across the world are already seeing substantial shifts in terms of demand.

The number of orders for phone and PC chips is going down, whereas ICs for the automotive industry continue to be in high demand.

This is the right moment for carmakers to start building buffer stock, Cheng-Ming Lin, director of automotive and MCU business development at TSMC, said recently at the Global Smart Vehicle Executive Summit of Semicon Taiwan 2022.

In other words, given the burden on chipmakers has been reduced following the dropping demand for smartphones and PCs, the automotive industry can improve the global inventory and therefore boost their production in the short term.

Otherwise, Lin warns, there’s a chance another strong wave of the chip shortage could emerge, eventually throwing carmakers into another crisis caused by the lack of semiconductors.

Speaking about the reasons that caused the massive disruptions in the automotive industry, the TSMC executive explained that most carmakers canceled their orders for chips in early 2020 following a massive drop in demand for new cars. Given they worked with live chip stock, car manufacturers believed they could order the chips when they would see signs of recovery, but the changing trends caused by the global health issue eventually pushed them into a years-long crisis.

Most chipmakers filled their order books with production for phone and PC chips, especially as the world started working remotely, Lin explains. And it all happened because carmakers were unfamiliar with how foundries work, not knowing that the lack of inventory would represent a high risk of disruptions in daily operations.

This is why, Lin warns, this is just the perfect moment to build buffer stock, as a recovery in terms of demand for PCs and smartphones could make it hard for automakers to get their hands on semiconductors, especially as the number of ICs required for new-generation vehicles is continuously on the rise.
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About the author: Bogdan Popa
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Bogdan keeps an eye on how technology is taking over the car world. His long-term goals are buying an 18-wheeler because he needs more space for his kid’s toys, and convincing Google and Apple that Android Auto and CarPlay deserve at least as much attention as their phones.
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