hardware

Auto Industry and Governments Scramble to Alleviate Semiconductor Shortage

Rolling supercomputers face semiconductor shortages
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Volkswagen AG

· less than 3 min read

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Today’s average car has 100 million lines of code, a 10x increase over 2010. And highly automated cars could require 500 million lines of code, according to Bosch. Major global automakers are also gearing up for mass production of software-heavy EVs.

These rolling supercomputers need lots of semiconductors, which are in short supply right now. So far, Volkswagen, Daimler, Ford, Subaru, Toyota, Honda, Nissan, and Fiat Chrysler have announced production cuts as a result.

How did this happen?

A brief timeline, c/o Bloomberg:

  • Hit by a Covid-induced demand shock in mid-2020, carmakers slashed orders for vehicle components, including chips. Auto supply chains run on lean inventory and just-in-time manufacturing doctrines.
  • Semiconductor foundries prioritized production for customers experiencing surging demand.
  • Auto demand bounced back. Carmakers were late to put in orders with contract chipmakers, who were tied up making parts for Nintendo Switches and other hot gadgets.

Automakers have governments on speed dial

European and American automakers have approached Taipei for help. Germany’s economic minister wrote to his Taiwanese counterpart with strong “plz fix” vibes: “I would be pleased if you could take on this matter and underline the importance of additional semiconductor capacities for the German automotive industry to TSMC.”

Taiwan’s economic ministry is running interference and asking chipmakers to pivot to cars. US automakers say they’re coordinating with the Biden administration.

  • Still, the shortage could last for months, leading to more intermittent idling of auto plants.
  • Help is on the horizon later this year: TSMC will spend up to $28 billion on capex in 2021.

The common denominators are TSMC, the world’s largest contract chipmaker, and Taiwan. Specifically referring to semis, JP Morgan’s Ruchir Sharma recently wrote that “pound for pound, [Taiwan] is the most important place in the world.”

Bottom line: Seeing two pretty best friends is more likely than semis fading from prominence in the tech and geopolitical universes.

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Drones, automation, AI, and more. The technologies that will shape the future of business, all in one newsletter.