Efforts are underway to correct the global industry shortage in semiconductors: Chipmakers are looking for ways to boost capacity, the federal government is now taking steps to encourage chip production and automakers are reevaluating supply chain practices.
But those remedies will have little impact on the current shortage, say analysts and forecasters who are tracking the problem.
"You can't just snap your fingers and say, 'I need 20 or 30 percent more chips,' " said Jeff Schuster, president of LMC Automotive's Americas operations. "I think there's a feeling that, essentially, you're just waiting for the other shoe to drop."
Schuster and others point out that, despite the positive long-term benefits of various recent steps, such as squeezing more capacity out of existing microchip plants, they won't deliver quickly enough to solve the current supply glitch. Federal government intervention can do only so much in the short term.
"A lot of this, and how you deal with this in the future, isn't something that can be changed overnight," Schuster said.
The push to free up more capacity sounds promising. But the reality is that such plans won't help much for a while.
Global automotive chipmaker Renesas Electronics Corp. said last week that its Japanese plants are working on "overdrive" to meet orders, but there is little more it can do.
"They are running at the limit of their capacity," CEO Hidetoshi Shibata told Bloomberg. "Supply will remain tight through the first half of the year," Shibata said of the industry shortage. "And the way things look now, the situation will continue into the second half. But it's anyone's guess."
In one nod to relief yet to come, German megasupplier Bosch said last week it has reached a critical testing phase at its own new $1.2 billion chip plant in Dresden, Germany. But that factory project has been under construction for two years and isn't expected to start production until the end of this year — a testament to how long it takes to put new manufacturing capacity on line.
More notable is that Bosch undertook that plant project to meet its own growing needs as it converts headlong into being a supplier of advanced vehicle components.
Coincidentally, chip producer GlobalFoundries of Santa Clara, Calif., last week announced a partnership with Bosch to develop radar chips for driver-assistance features.
But Mike Hogan, GlobalFoundries general manager of automotive, industrial and multi-market, said the move was part of a long-term sourcing strategy — not a response to the current commodity shortage. The near term, Hogan warned, is going to be painful.
"It will get better," he said of the supply problem, "but it could have a lumpy path out of this bottom. It could last longer for some. It's just very hard to predict."
The problem, Hogan added, is that only about 12 percent of the semiconductors used in the U.S. are made here. "The entire auto industry realizes that, not only does it need more semiconductors, semiconductors are actually defining the product," he said.
President Joe Biden last month issued an executive order calling for a review of the domestic supply chain, and many industry leaders have called on the White House to initiate trade agreements that would better secure chip supply in the future.
But federal action may only help in the long run, said Chris Richard, principal of the semiconductor industry at consultancy Deloitte.
"Certainly, our tax policies, both at the federal and state level, the incentives to encourage this type of R&D and manufacturing over the long run, could make a big difference," Richard told Automotive News. "But I can't think of things that can be done that are going to help this quarter or the next three months, or maybe even the next six months.
"I don't know if executive orders can fix this."
Anil Valsan, global automotive and transportation lead analyst at consultancy EY, noted that some major chip companies "are reacting to some government pressure and trying to mitigate some of the pressure that they're getting. But it is not significant pressure, because their biggest revenues are coming from a lot of the other sectors."
Reallocating their capacity, Valsan predicted, "is likely to drag out through the rest of this year."
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March 14, 2021 at 12:00PM
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No quick solution to microchip shortage - Automotive News
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