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NewslettersTransmission

Chip shortage or crisis? Semiconductor issue illustrates the difference

On the Transmission show this week, we speak with Dan Hearsch, managing director at AlixPartners, about the difference between a shortage and a crisis. In the auto supply chain world, that distinction means a lot as automakers continue to scramble to source the semiconductor chips they need to keep building cars. Hearsch told us that the acute crisis side of the chip shortage is peaking right now, and should be over in the next few weeks or maybe months. As for the overall shortage, well, that’s going to last a lot longer.

Look for our discussion with Hearsch in your podcast feeds Tuesday (sign up here if you haven’t already) and read on for more details about where AlixPartners sees things going.

AlixPartners: Chip shortage will cost automakers $110 billion in 2021

The chip shortage could have a $110 billion impact on the auto industry this year. That’s the prediction from AlixPartners, which issued a new report on the situation late last week. The analyst firm’s previous estimate, issued in January, was that the lack of silicon would hit the industry’s revenues for around $61 billion this year. Looking at more recent data, AlixPartners now thinks automakers will build around 3.9 million fewer vehicles this year, resulting in a global light-vehicle production for 2021 of around 80.7 million units.

The chip shortage has hit everyone, as we know, and AlixPartners said this situation is causing automakers to focus on “supply-chain resiliency” in the long term so that similar disruptions can be avoided in the future. Automakers are cutting out middlemen suppliers and negotiating with chip manufacturers directly, Mark Wakefield, co-leader of AlixPartners’ global automotive practice, told Reuters. “These things are shocked into existence,” he said.

Ford redesigning some components to handle more ‘accessible’ chips

Speaking at Ford’s online annual shareholder meeting Thursday, CEO Jim Farley said the chip shortage could cost the automaker $2.5 billion this year and the company will probably build just half as many vehicles in the second quarter of 2021 as it planned. That’s the kind of shock, in Wakefield’s words, that makes you rethink how things are done. Ford is doing just that by redesigning some of its parts so the company can use what Farley called “more accessible” semiconductor chips.

Currently, Reuters said, the majority (around 60%) of the chips that Ford uses are 55 nanometers or larger. Farley said these “mature nodes” are difficult to acquire right now, which is why Ford is looking at using other types of chips.

“Not only are we redesigning a lot of our components to work with chips that are more accessible … but we think we need to look at buffer stocks, actual direct contracts with some of the foundries,” Farley said at the meeting, according to Reuters. “We think that’s going to be a really critical approach to our supply chain as we get more electronic components.”

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