Auto chipmakers are hustling to provide millions more chips to carmakers as temporary shutdowns continue at vehicle assembly plants around the globe.
Their efforts include ramp-ups of chip production above normal levels and using or even purchasing older chipmaking gear that suits the needs of automakers.
It isn’t clear how effective their efforts will be in the short-term, although many analysts and chipmakers feel the backlog will begin to be met by June.
There are still emerging signs of auto plant downtime due to a shortage of chips. GM announced on Wednesday an extension of previously announced temporary closings until March 15 to at least mid-April at plants in Kansas and Canada with a third in Mexico extended to the end of March. A fourth plant in Brazil that makes sub-compacts for South America will take downtime in April and May, the car giant said.
“GM continues to leverage every available semiconductor to build and ship our most popular and in-demand products, including full-size trucks and SUVs for our customers,” GM said in a statement.
To help catch up, Reuters reported Thursday that some resellers have resorted to buying up used chipmaking gear by stalking old factories in the U.S., Japan and Europe and waiting for them to close in hopes of purchasing the gear inside.
Chips used in braking and engine systems are typically made using older tech that is sufficient to meet automaker reliability requirements, while newer infotainment and assisted driving technologies require modern chips made in cutting-edge chip factories.
“Auto ICs are typically made with older gear, as these chips don’t require the most advanced technology with some exceptions—Tesla in particular,” said Dan Hutcheson, an analyst at VLSI Research.
Utlilization at these fabrication plans has now reached “well over 90%” in reaction to the auto chip backlog, which is 10% above typical levels for operation, Hutcheson added.
Kevin Anderson, an analyst at Write-Tek, said there is a market for tools to make 200 mm wafers (that are especially important in making chips for vehicles), which has accelerated with the auto chip shortage. "However, adding capacity especially for automotive with a qualification cycle can take six months or a year, if not more," he said.
"Due to the extreme shortage situation, that may be accelerated," he said. "The improvement would just be a few percent of the total market in the near term...I think the automotive shortage should be over by June as automotive orders are scheduled but total market demand for 200 mm capacity will be tight through the end of the year. That will result in increased prices where long-term contracts are not in place as end customers compete for the limited supply."
Demand for auto chips increased in the fourth quarter of 2020 with unexpected strength in auto sales after the pandemic had forced auto assembly plants to shut down in many parts of the world in April and May.
Automakers and unions have converged on Washington to urge leaders to respond to factory closings. Congressional leaders from both major parties and the Biden administration have issued calls for billions of dollars of financial support for domestic chip manufacturing and research. A 100-day study is underway into making the supply chain resilient for chips and other critical products.
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The auto chip shortage has left automakers pointing fingers at chipmakers for the supply shortage, prompting the chip industry to respond. Chipmakers and their trade groups argue that once automakers saw demand pick up in late 2020, it was too late turn chipmaking on a dime and produce all that was needed. Some automakers had ordered enough chips before the surge to stockpile, but others did not.
Patrick Moorhead at Moor Insights and Strategy boiled the problem down to a single tweet on Feb. 26, saying he was “tired of hearing people say ‘automakers are being shorted’ on semiconductors and concluding that when auto demand surged, automakers didn’t order enough chips.
Also on Feb. 26, the Semiconductor Industry Association released a blog that explained how it takes time to ramp up production for the chip shortage. There are up 1,400 steps in overall production of a chip wafer, with up to 26 weeks to manufacture a finished chip.
“What this ultimately means is the semiconductor industry is currently doing all it possibly can in the short-term to increase utilization and meet increased demand both in the auto sector and more broadly for all customers,” the SIA blogger wrote.