Automakers and chipmakers disagree on when semiconductor shortage will ease

Chips are pictured at the factory of semiconductor packaging company Unisem in Ipoh, Malaysia October 15, 2021. REUTERS/Lim Huey Teng/File Photo

SAN FRANCISCO, Feb 4 (Reuters) – Automakers including General Motors (GM.N), Ford Motor (FN) and Hyundai Motor (005380.KS) predict a nearly two-year chip strain will will ease in the second half of 2022, but auto chipmakers, on the other hand, expect a recovery to take longer.

During their quarterly earnings reports over the past two weeks, GM CEO Mary Barra predicted the semiconductor shortage would ease in the second half, Ford predicted a significant improvement in the second half after a low Q1 vehicle sales and Hyundai predicted chip supply. would return to normal levels in the third quarter of this year.

But major auto chipmakers like NXP (NXPI.O) and Infineon (IFXGn.DE) predict supply squeeze will persist despite production increases.

Differing perspectives on the most pressing issue facing the auto industry prolong uncertainty about its recovery from the coronavirus pandemic and risk hampering its efforts to transition to new chip-intensive technologies such as electrification and safety and driver assistance functions.

The chip shortage will cost the global auto industry in 2021 $210 billion in revenue and a production loss of 7.7 million vehicles, consultancy AlixPartners estimated in September.

But the tide is definitely turning, according to automakers.

Tesla (TSLA.O), which managed chip supply last year through strategies including writing new software to handle chip changes, expects chip shortages to last forever. year before easing next year.

Chief executive Elon Musk said on an earnings call last month that the shortage was not a long-term problem, with factories increasing capacity and automakers guilty of chip purchases by panic, which slowed down the supply chain.

He described this to investors in candid terms.

“I think there’s also a degree of toilet paper issue, where, you know, there was a shortage of toilet paper during COVID, and like, obviously, it certainly wasn’t really an increased need for ‘wipe ass. It’s just freaking people out…”

Chip company Qualcomm (QCOM.O) was optimistic.

“I think a lot of our peers with us are prioritizing the auto business and shipping as much as possible,” Akash Palkhiwala, Qualcomm’s chief financial officer, told Reuters.

MATURE CHIPS

Major auto chipmakers, however, were less optimistic.

Infineon said on Thursday that the supply-demand balance would improve in some chips for the second half of this year, but the market for mature chips – crucial for automakers – would remain tight.

“The supply limitations are far from over and will persist through 2022,” Infineon CEO Reinhard Ploss said on an investor call. Infineon is concerned that the spread of the Omicron variant COVID-19 could lead China, with its zero-COVID strategy, to close factories, limiting supply.

NXP also said the industry will not recover from the supply-demand imbalance this year.

Semiconductor makers have an incentive to focus on the newest and most expensive chips, and Apple Inc’s Tim Cook (AAPL.O) said there were significant supply constraints on ” legacy nodes”, less sophisticated chips used in power management and display devices, although they are improving in the current quarter.

“There are a few factories that are going to come online towards the end of the year that will help those markets but won’t completely solve the problems,” said Peter Hanbury, partner at Bain & Company.

A chip factory takes a few years to build and two more to reach full capacity, STMicroelectronics said. The company said in November it would take until 2024 or 2025 to see a major increase in capacity.

Ford has partnered with US chipmaker GlobalFoundries to reduce Taiwan’s TSMC reliance on older technology chips, which Ford chief executive James Farley described as “rich in features”.

“We’re very dependent on TSMC for our feature-rich nodes. Obviously capacity is at risk over time as the industry moves to more advanced nodes, including us,” Farley said during the talk. a conference call.

He said Ford would put money into working with GlobalFoundries on older Node chips, although it will take time for the chipmaker to build the chips in the United States.

“We learned the lesson very painfully that we cannot manage the supply chain for these key components the way we have,” he said, adding that supply chain is critical to the transition. towards the electrification and digitization of vehicles.

(This story has been reclassified to correct grammar in the 4th paragraph)

Reporting by Hyunjoo Jin and Jane Lee; Additional reporting by Ben Klayman; Editing by Peter Henderson and Muralikumar Anantharaman

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