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How Tesla pivoted to avoid the global chip shortage that could last years
Fred Lambert
- May. 3rd 2021 1:47 pm ET

@FredericLambert


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Tesla explained how it pivoted to avoid the global microchip shortage that Intel now says could last for several more years.

The pandemic has resulted in an increase in demand for many electronics and computers that the supply chain couldn’t handle, especially the semiconductor industry.

This microchip shortage, in turn, affected the automotive industry, which has increasingly become a big consumer of microchips.

We previously released a deep-dive report on how it is affecting electric vehicle production as several automakers had to halt production until chip supply could catch up.

Pat Gelsinger, CEO of Intel, one of the biggest semiconductor companies, recently said that it could take a “couple of years” for the industry to catch up to the surging demand.

Tesla was also affected by the chip shortage.

During Tesla’s Q1 2021 earnings call last week, CEO Elon Musk said that Tesla had some very important supply chain issue, mentioning the chip shortage, and even compared Tesla’s logistics difficulties to World War 2 logistics challenges:

“This quarter, and I think we’ll continue to see that a little bit in Q2 and Q3, had some of the most difficult supply chain challenges that we’ve ever experienced in the life of Tesla and same difficulties with supply chain, with parts — over the whole range of parts. Obviously, people have heard about the chip shortage.”
Tesla uses several chips inside its vehicles for different control systems and its infotainment system. Most famously, the automaker uses a chip that it designed itself for its self-driving software.

That chip is produced by Samsung.

Interestingly, Tesla disclosed that it managed to avoid being too affected by the chip shortage through pivoting to microcontrollers and developing new firmware to work with new chips from different suppliers.

The company wrote in its shareholders letter:

“In Q1, we were able to navigate through global chip supply shortage issues in part by pivoting extremely quickly to new microcontrollers, while simultaneously developing firmware for new chips made by new suppliers.”
The automaker did note that the supply chain issues could still affect them through the next few quarters, but Tesla only had to close its Fremont factory for a few days last quarter, which is not as bad as the production halts that some other automakers are reporting.

Electrek’s Take

I don’t know about logistics issues comparable to WWII, but the supply chain pivot that Tesla did to avoid the bulk of the chip shortage is impressive.

Tesla is showing the advantages of its startup mentality to move quickly and stay nimble.

This could be a big deal in the next few years if the chip shortage indeed persists like Intel predicts.


SOURCE: ELECTREK





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BillyGee

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Tldr- Tesla avoided a shortage by using stuff that wasn't in short supply instead.
 

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Tldr- Tesla avoided a shortage by using stuff that wasn't in short supply instead.
... And not shorting their production guarantees last year.

Nimble company is nimble. Of course, the new S and X are still delayed, so it's a half (well, greater, those are a tenth of their production) victory.

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Stockpile of Unfinished Ford Super Duty Pickups Missing Chips Is Now Visible from Space

Notice how new trucks are getting harder and harder to find? Well, here's why.

BY PETER HOLDERITH MAY 5, 2021

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PHOTO © 2021 PLANET LABS INC. ALL RIGHTS RESERVED. REPRINTED BY PERMISSION
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It's no secret that the global chip shortage is wreaking havoc on automakers; even chip-hoarding Toyota is starting to feel the heat. Stellantis, Ford, GM—pretty much everybody is
getting a taste of a major supply-chain shortcoming, and needless to say, it's bad for business.

But just because vehicles need chips to be delivered doesn't mean you have to stop making 'em altogether. Case-in-point, Ford is still making trucks; it's just making them without the necessary bits, holding them until the chips finally come in, and then shipping them out to dealers. Ford is doing this with what looks like thousands of vehicles, and you can see the results from space.

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PHOTO © 2021 PLANET LABS INC. ALL RIGHTS RESERVED. REPRINTED BY PERMISSION

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The Drive obtained satellite images of Kentucky Speedway, posted above, which paint a pretty clear picture. There are thousands of trucks at the facility awaiting chips. You can see the progression, particularly in the righthand lots; the first photo in the set of three is dated April 18 of this year while the second is from April 26. The third and final shot is a more recent view captured on May 1.

There's not just one specific type of pickup being held here, either. There are Super Duty trucks in virtually every configuration just waiting to get sent out once they're completed. When it comes to which vehicles Ford decides to produce, clearly they don't really have the ability to discriminate anymore.

We contacted the Dearborn automaker to see what it had to say, and it tracks with what you've read so far. A spokesperson said that the company is "making the most of our available semiconductor allocation and will continue finding unique solutions around the world so we can provide as many high-demand vehicles as possible to our customers and dealers." The spokesperson continued to explain that the vehicles at the Kentucky Speedway would be held for "a number of weeks" before they could be completed and then shipped out from the facility, but not before quality checks were completed.

The Super Duties seen here are manufactured at Ford's Kentucky Truck Plant in Louisville, roughly an hour away from the racetrack in Sparta.

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In normal times, the track can accommodate as many as 107,000 people, which is why there's so much available parking in the first place. It's worth noting that Amazon is reportedly also storing a large number of empty trailers there—those obviously do not belong to Ford. The claim that the speedway is making a "million dollars a month" storing the vehicles and trailers could not be verified.

Of course, it's unclear when any of this is going to be resolved. The chip shortage is still a big issue for automakers and just another one of the pandemic-era problems that might stick around for a while. Until those problems are resolved, expect finding the perfect new car to remain difficult.

SOURCE: THE DRIVE



Semiconductor shortage hits Ford Bronco SUV, Ranger pickup production
PUBLISHED WED, MAY 5 20213:00 PM EDTUPDATED WED, MAY 5 20215:21 PM EDT

Michael Wayland@MIKEWAYLAND
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KEY POINTS
  • The latest production cuts from Ford due to an ongoing shortage of semiconductor chips will impact early production of its highly anticipated Bronco SUV.
  • The downtime will not impact the Ford’s plan to begin delivering the vehicles to dealers this summer, according to a company spokeswoman.
  • Aside from Bronco, others vehicles impacted by the cuts include Ford’s Super Duty models and Mustang.
DETROIT – Ford Motor confirmed Wednesday another round of production cuts due to the ongoing shortage of semiconductor chips, saying it will impact early output of its highly anticipated Bronco SUV.

The automaker said it will extend shutdown times at several plants and add two weeks of downtime starting May 17 at its Michigan Assembly plant. The facility currently produces the Ford Ranger midsize pickup and early models of the relaunched Bronco, which was scheduled to start full production this summer.

The downtime won’t impact Ford’s plan to begin delivering the vehicles to dealers this summer, according to a company spokeswoman. Ford previously delayed the Bronco’s spring launch due to coronavirus-related problems in its supply chain.


Other than Michigan Assembly, Ford said it was adding shutdowns during that two-week timeframe at three other plants in Illinois, Michigan and Missouri. They produce a variety of vehicles ranging from the automaker’s Super Duty pickups to Ford Mustang.

The added shutdown times come a week after Ford CEO Jim Farley warned investors that the company expected to lose about 50% of its planned second-quarter production, up from 17% in the first quarter.

Ford now expects problems from the chip shortage to cut about $2.5 billion from its earnings in 2021, the high end of its previous guidance for the year.

Semiconductors are key components in automotivemanufacturing, used in infotainment, power steering and braking systems, among other things.


As multiple plants shuttered last year due to Covid, suppliers directed semiconductors away from automakers to other industries, creating a shortage after consumer demand snapped back stronger than expected. The parts can contain several different sizes and types of chips.
Here’s a look at the most recent shutdown announcements provided by Ford:
  • Chicago Assembly Plant, Flat Rock Assembly Plant, Kansas City Assembly Plant F-150 and Transit lines, and Michigan Assembly Plant will be down the weeks of May 17 and May 24.
  • Ohio Assembly Plant will continue to produce only Super Duty Chassis cabs and Medium Duty trucks through the week of May 17 and will be down the week of May 24.
  • Kansas City Assembly Plant in Missouri, which builds the Ford Transit van, will operate just one shift the weeks of May 31 and June 7 to complete early builds of the E-Transit.
  • Hermosillo Assembly Plant in Mexico is down through the week of May 10.
  • In addition, Kentucky Truck Plant will be down the weeks of June 7 and 14 to make plant modifications to prepare for the upcoming launch of the next-generation Super Duty.


SOURCE: CNBC






GM build-shy strategy has tens of thousands of vehicles parked awaiting chip parts
Jamie L. LaReau
Detroit Free Press


In late January, retired General Motors employee Joseph Jones bought a 2021 GMC Sierra full-size pickup after having driven his 2004 Sierra for 17 years.

Jones, 68, tracked the production of the new light-duty pickup in cherry red from his home in Franklin, Tennessee. He saw that it was built on Feb. 15 at GM's Silao Assembly Plant in Mexico, so he eagerly awaited its arrival any day.

But as of May 5, Jones' pickup remained in Mexico, parked alongside thousands of other GM pickups built shy of the final parts needed to complete them because of a global semiconductor chip shortage.

"I am getting more aggravated by the day," Jones said. "The customers are stuck in the middle and I would love better communication through General Motors. I know everybody has been in the same situation, Ford, GM, Chrysler, Nissan ... everybody has been held hostage by the shortage of this chip.”

GM is running what the industry has called a build-shy strategy, where it builds as much of its vehicles as it can, less the parts that require the chips. It is storing tens of thousands of incompletely-built pickups, SUVs and vans in Indiana, Illinois, Missouri, Texas and Mexico, several people familiar with GM's production told the Free Press.

"We've been doing (build-shy) for a few months," said UAW Local 2209 Shop Chairman Rich LeTourneau at Fort Wayne Assembly in Indiana, where GM also builds full-size light-duty Chevrolet Silverado and GMC Sierra pickups. "We have about 15,000 trucks parked now."

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GM declined to confirm figures, but said its build-shy strategy benefits customers, dealers and employees because it keeps the assembly lines humming, building its most in-demand and profitable vehicles.

But some, including dealers and Wall Street, worry about the impact of the chip crisis on business if it continues much longer. On Wednesday, when GM reported strong first-quarter earnings, GM CEO Mary Barra assured investors that GM is managing the crisis and foresees it resolving during the third and fourth quarters.

One thing is certain: The strategy will dictate a new way for GM to work with dealerships that includes fewer cars on lots in the future.

Just in time
Ford Motor Co. is handling the chip shortfall similarly to GM. Ford told industry analysts that the company had about 22,000 vehicles awaiting parts at the end of March.
During a first-quarter earnings media call on Wednesday, Barra declined to disclose how many vehicles GM has that are awaiting parts.

“The number changes because, as chips become available, we’re working that” to expedite getting the parts to vehicles, Barra said. “What I will tell you is that we do have some vehicles that are in that status. When we have the semiconductor and can insert the module, we’ll do that and then the vehicle will go through a very thorough and rigorous quality testing” before shipping to dealerships.

Demand for the chips, which are made mainly by a few big suppliers in Taiwan, has been strong in part because of the COVID-19 pandemic and an increased use of laptop computers, 5G phones and other IT equipment that use the chips. Cars use the chips in a variety of electronics systems.

"Building shy only tells investors that there’s potentially a lot of wholesale revenue coming later this year," said Morningstar analyst David Whiston. "Until GM can build and ship the vehicle, it can’t record revenue though. Wall Street usually likes results, not potential."
GM currently has either stopped production or reduced shifts at six plants in North America because of the chip shortage, including Lansing Grand River Assembly, which will take downtime beginning the week of May 10 through the week of June 28. It will do some limited pre-production of the 2022 Cadillac Black Wing series in June.

More:GM to idle Lansing plant due to semiconductor chip shortage

But other GM plants continue to churn out in-demand vehicles, even if thousands of those vehicles sit on the sidelines awaiting a chip part to finish production.
At Flint Assembly, where GM makes its highly profitable heavy-duty full-size Silverado and Sierra pickups, it has had to build-shy about 100 to 150 pickups three times this year, said UAW Local 598 Chairman Eric Welter. The plant got the parts needed to complete those vehicles in less than a week, he said.

"GM has done a pretty decent job keeping parts flowing especially at my plant, which has had an advantage and we haven’t had the shutdowns," Welter said. "They’re moving mountains to make things happen. We get hour-by-hour updates sometimes when they’re running tight.”
In mid-March, GM said it will build certain 2021 light-duty full-size pickups without a fuel management module until the end of the model year because of the shortage of chips used in the modules.

Better than not building
Besides the 15,000 light-duty full-size pickups parked at Fort Wayne, LeTourneau said he understands that about the same number were parked at Silao, in Mexico.
At Arlington Assembly in Texas, a person familiar with the plant operations told the Free Press there were about 2,000 full-size SUVs awaiting parts. The person asked to not be named because he is not authorized to share that information.
"We are running at full speed and putting out around 390 to 425 SUVs per shift," the person at Arlington said.

More:GM halts weekend full-size pickup production at 2 plants due to parts shortage

At GM's Wentzville Assembly in Missouri, GM had about 30,000 vehicles parked in several areas around the state awaiting parts, said two people familiar with the matter, who asked to not be identified because they are not permitted to share that information with the media.
GM makes the Chevrolet Colorado and GMC Canyon midsize pickups and full-size vans at Wentzville. Starting April 26, the plant's general assembly moved from three shifts to two shifts, GM spokesman David Barnas said. This will last until the plant goes down for its scheduled launch changeover the week of May 24.

But GM said it will run midsize pickup production at full volume until the scheduled launch changeover because the stamping, body and paint shops will run on three shifts.
Barnas said the build-shy strategy is "better for our customers, dealers and employees at the plant as opposed to not building at all. Importantly, it will help us quickly meet the strong customer demand for our products as more semiconductors become available and we are able to complete the vehicles at the assembly plants and ship to dealers.”

Analyst Whiston said GM has to have those high-profit vehicles to dealerships as soon as it can for the bottom line.

"GM needs all the light trucks, especially pickups, it can so plants like the Arlington and Fort Wayne probably will build-shy for a long time," Whiston said. "GM is prioritizing the vehicles it makes the most money on which is trucks. It’s the best you can do with a bad situation."

Customers pre-ordering
Matick Chevrolet Vice President Paul Zimmermann said his sales, especially of pickups, are down because of the chip shortage. In April he sold 45 pickups when he'd typically sell 70.
Matick has only 446 total vehicles on its lot when it would normally have close to 1,000. In fact, when a hauler pulls up to Matick Chevrolet in Redford, nearly half the vehicles on it are already sold.

"It’s not dire, but the chip shortage is impacting our inventory levels," Zimmermann said. "We’re trying to be as pro-active as possible in reaching out to customers. We don’t want a customer who, in the July time frame, has a lease due and they say, 'What do you mean there’s no trucks?' So we are reaching out and saying ‘Here’s the situation.’"
There are a “tremendous amount” of customers who are pre-ordering vehicles with money down, Zimmermann said. Still, Matick typically sells 500 to 600 new and used cars a month. In April, it did 420.

“It’s not bad, it could be worse," Zimmermann said. "I am really confident in what General Motors has decided to do. The build-shy strategy will pay dividends in the fourth quarter."

Katie Bowman Coleman, owner of Bowman Chevrolet in Clarkston, said she has 60 vehicles that are in build-shy status and will be delivered to her in the third quarter. Her staff is calling lease customers six months ahead of a lease coming due to start a pre-order for another vehicle.
"The third quarter should give us some relief," Coleman said. "Build-shy is keeping the line going right now, which is great, but at some point the slinky will come back down the stairs and you have to do something with those vehicles.”

Different dealer strategy
Barra has said the chip shortage could cost GM up to $2 billion in lost earnings this year, but she expected chip supplies to return to normal in the second half of the year and that GM would try to make up as much lost production as possible. On Wednesday, Barra said GM is "highly confident" it will hit the high end of its guidance of earnings before interest and taxes of $10 billion to $11 billion.

But on Monday, Intel Corp. CEO Pat Gelsinger predicted the chip problem will plague the auto industry "for a few more years," Bloomberg reported.

GM's Barnas said the automaker continues to keep dealers informed of the situation and is "working to provide them with as many in-demand products as possible.”
Still, the chip shortage means dealers might have to get used to operating on lower inventories in the future, Barra said Wednesday.

“We will never go back to that inventory we had pre-pandemic because we’ve learned how to get the right vehicle to the right dealer and customer at the right time without having to have deep inventory on their lot,” Barra said, adding she’s had dealers email her pictures of their empty lots.

“We’ve learned a lot. Our dealers have been very agile and we have tools that GM developed that has helped dealers have visibility as to what vehicles are coming to their lot and when,” Barra said. “We will run at a lower level of inventory, not a lot lower because a consumer does like to come to a dealership and be able to drive off a lot in a new car, but we can be more efficient.”

'A sellers' market'
In the meantime, the laws of supply and demand work in dealers' favor.
“It’s a sellers’ market with very little room for negotiation," Coleman said. "Most of our vehicles are still not close to sticker, but that’s because of the employee pricing that happens in metro Detroit.”

Wall Street views the situation similarly. The industry has an average supply of a record low 33 days, wrote Adam Jonas, an analyst for Morgan Stanley, in a research note on May 4. Ford and GM lead the industry in terms of vehicles taken out of the production schedule, according to AutoForecast Solutions. It said Ford is projected to have 362,663 fewer vehicles produced this year and GM to have 326,651 fewer vehicles built.
But consumer demand for new cars is robust, so "amid a semi chip shortage, the question now turns to whether we potentially run out of cars?" Jonas wrote in the research note.
Still, the timing of the chip shortage, along with increased demand for new cars, is "the most favorable supply/demand situation at the manufacturer and dealer level in living memory," Jonas wrote.

Auto credit is thriving by almost all accounts, too, meaning many automakers are enjoying record high pricing, strong residual values and financial services profitability.
"It’s hard to imagine a better environment with which to pass through the impact of supply shock and price inflation to consumers who are effectively lining up to take delivery of their new car off the car carrier," Jonas wrote. "The story of 2021 is: It’s a seller’s market in autos. We can make up for most of the shortages/inflation this year. What we can’t make up this year, we can rather easily make up for next year.”



SOURCE: Detroit Free Press







Chip Crisis Deepens at Jeep Maker Stellantis
Car maker cut first-quarter production by about 190,000 vehicles as semiconductor shortage dragged on

Jeep maker Stellantis NV slashed planned production by 11% in the first three months of the year due to the global chip shortage and warned of additional cuts in the weeks ahead as the crisis lingers.

A lack of semiconductors resulted in a cut to planned first-quarter production of about 190,000 vehicles, the car maker said. The problem will force it to cut second-quarter production even more, but it expects the situation to improve after June.

Eight of the company’s 44 plants were affected to some degree by the shortage as of Tuesday. The company’s finance chief, Richard Palmer, said Stellantis expects the issue to continue into next year, adding, “It would be naive to expect it to just disappear.”

The warning came as growth in South America and Europe fueled a 14% rise in sales at Stellantis to €37 billion, equivalent to about $44.5 billion, compared with the first three months of last year, when lockdowns related to the coronavirus pandemic took their toll on sales and factory output around the world. Shares rose as much as 6% in Europe on Wednesday.


SOURCE: WSJ




Chip shortage explained: Low inventory, skyrocketing used car prices and no end in sight

Here's how this mess happened, and why it's not going away soon


As you well know, microchips are found in virtually everything, from the obvious (cellphones, smart devices) to the not-so-obvious (your power tool's lithium-ion battery, for example). In your car, there are computer modules controlling virtually everything, from engine and transmission operation to in-car tech and virtually everything in between. Long gone are the days of cars having "a" computer. Today, they're everywhere, and interconnected in ways that make them all vital to a car's fundamental operation.

The microchip is as ubiquitous in modern consumer products as wood is in home construction. But unlike lumber, microchips aren't merely refined raw material. While many chips (such as those used for computer memory) have numerous applications, that doesn't mean that all computer chips are created equal. The specialized computers that manage your car's powertrain components, infotainment and onboard safety systems can't simply be swapped out for whatever's available.

Semiconductor fabrication is a complex and expensive process, which limits the size of the field, and not every manufacturer is capable of supplying the chips needed by car manufacturers. By and large, silicon producers are several steps removed from the assembly of the products their chips power, but some, such as Intel, Samsung and even Foxconn, are borderline household names.

Others, such as Renesas and Taiwan Semiconductor Manufacturing Company (TSMC), are silent behemoths, known mostly to industry insiders and tech enthusiasts. While companies like Intel manufacture a lot of their own chips, they and others, including computing giants AMD and Nvidia often rely on contract manufacturers like TSMC for chip production.

Production of (and demand for) chips is greater than it has ever been, so why are we suddenly out of them? The short answer, predictably, is "COVID" or, more broadly, "market forces." Want the long answer? Well, strap in. It's a bumpy road.

The onset of COVID
For starters, silicon wafer and microchip production was hit early on by COVID just like any other industry. The impact of this was negligible, as it happened while demand for cars was similarly suppressed. Dealerships shut their doors to walk-in customers and lines went idle to minimize the first wave of coronavirus infections. As manufacturing re-opened, automakers remained cautious in their supply orders as demand recovered slowly in the face of uncertain economic conditions, widespread unemployment and ongoing health concerns.

The lack of dealership traffic had a secondary consequence as well: Since customers weren't buying new cars, they weren't trading in old ones either, which put a squeeze on businesses that relied on used inventory, including the new generation of Internet-based car dealers like Carvana and Vroom. This was the beginning of the upswing in used car values, but we'll come back to that later.
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Meanwhile, at home ...
As COVID-related social and workplace restrictions began to take hold, demand for cars may have dipped, but demand for consumer electronics skyrocketed. Computers, video game consoles and other personal productivity and entertainment devices got hot quickly as consumers learned that their existing hardware wasn't going to cut it for the new normal. Enterprisedemand jumped too as businesses around the world scrambled to equip their workforces for remote operations.

Like anything else in the modern industrial supply chain, microchips are produced to demand, and with automotive demand flagging and consumer electronics demand going through the roof, chip producers adjusted their production schedules to accommodate.

Further compounding the situation, the second half of 2020 also saw the launch of the latest generation of video game consoles from both Microsoft and Sony along with a new generation of desktop and mobile GPUs and CPUs from Nvidia, AMD and Intel. All of these launches were competing for the same slice of the consumer silicon pie.

To make matters worse, the growth in consumer electronics and ship-to-home sectors created even more demand. From the data centers that power large logistics operations to the forklifts moving product around warehouses, all of it relies on microchips. Those same chip manufacturing foundries that produce microchips? Yeah, they're often managed by the very computers they churn out.

As this wave of consumer demand crested in the fall, circumstances conspired to drive up demand for new cars. With restrictions lifting and the economy moving back toward normal, shoppers returned. Starved for volume, dealers and manufacturers welcomed their customers back with open arms — and open coffers — offering deals to entice shoppers into showrooms. It worked, and as the fourth quarter of 2020 closed, things were looking up for the automotive industry, even if alarm bells were starting to go off in the background.

A perfect storm
Early signs of the budding shortage appeared in the still-booming consumer sector. Even with automotive demand just heating up, the silicon supply was already becoming thin on the ground; just ask any holiday shopper who was after a PlayStation 5 or Xbox Series X. Some automakers signaled that they were anticipating chip supply shortfalls way back in December.
But even with chip manufacturers reallocating production to automotive supply channels, they were simply unable to ramp up production sufficiently to meet revived (and spiking) demand. The ongoing shortage of used-car inventory compounded the situation. As prices for preowned models climbed, they reduced the downward pressure on new-car prices. Incentives started to dry up as customers opted to buy new rather than overpay (in their eyes) for somebody else's leftovers.

Then 2021 brought even more complications. In March, Renesas, which is one of the largest chip suppliers for the automotive sector, was hit by a massive fire that brought chip production to a halt and damaged the majority of its equipment to the point of inoperability. Renesas restarted manufacturing in mid-April, but does not expect to be back to full capacity until Q3. Production of microchips can lead final assembly by as much as two months, meaning it could be August or September before Renesas supply reaches all of its end customers in normal quantities, which would allow vehicle production to resume.
F-150-Super-Crew-Platinum-PHEV-front-three-quarter.jpg

Consequences
Since the beginning of the year, just about every major automaker has been forced to idle production of at least one vehicle and in many cases, the shutdowns have impacted high-volume and high-margin offerings, such as the Ford F-150. Depending on the particular chips OEMs are struggling to source, some have found ways to keep lines running by building cars only without certain options, such as advanced safety and driver assistance features. In many cases, however, the missing chips are critical, bringing assembly lines to a halt until they can be acquired.

Otherwise explosive first-quarter sales results have been curtailed in many cases by the inability to produce components for highly popular models. We mentioned the Ford F-Series above, but similar problems have plagued shoppers who are after some versions of Toyota's RAV4 and both Honda's Accord and Civic models, among many, many others. Honda and Nissansaid the chip crisis could cost as many as 250,000 sales. One projection puts the number of "lost cars," that is, those that won't be built because of the chip shortage, at 2.5 million vehicles.

To make matters worse, this all happens to be coming to a head during tax season, which is typically a busy time of year for car dealers. Americans often turn their tax refunds into down payments on new cars and trucks. Added pressure this year comes in the form of COVID relief, which has left shoppers even more cash-flush. The rest is basic supply and demand; the former is scarce and the latter is currently beyond sating.

And while the chip shortage is not directly responsible for the current situation in the used-car market, as we illustrated above, the two go hand-in-hand. The end result is that both new and used car prices are shockingly high. There hasn't been a better time to sell an unneeded car in recent memory; unfortunately, there also hasn't been a worse time to buy one.
Used-car-index2.jpg


Outlook
TSMC says it hopes to be able to meet the minimum requirements of its customers by the end of June, but even if microchip production as a whole can meet production demands by the end of 2021, it will probably take longer than that for the market to normalize. The used-car shortage will continue to be a problem for as long as new-car inventory growth remains stunted, as shoppers won't have new purchases for which they'd normally be trading in their new cars. That means high prices on both ends of the spectrum.

And while governments and industry lobbies may be attempting to pressure semiconductor fabricators into increasing production, it's not as simple as merely turning up the wick. As with other specialized industries, the tooling involved is complex and expensive. In the longer term, investors are looking at expanding U.S. microchip production. Intel already produces silicon in the American southwest, and startups hoping to do the same elsewhere in the U.S. have drawn the attention of investors.


SOURCE: autoblog
 

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