Semiconductor Shortage and Car Production

[gnuarm]

I read today Tesla has 10,000 cars warehoused in Freemont because they don't have all the semiconductors required to complete them. While that sounds like a lot, it's not enough for Tesla to shut down their lines. But it does indicate a problem that can hurt the bottom line. The really bad part is there is little sign of the shortage ending. Many reports from the major players in semiconductors is that it can last a year or two even.

Semiconductors fabs take even longer to bring up than auto factories. I think they are around two years now, so no one is going to build their way out of this in the short term.

I'm in electronics and I've seen this before. The problem is everyone reacts like there's a run on toilet paper so it disappears from the shelves. If the manufacturers ramp up they will end up with excess production when it is over, so they will remain very conservative. The only thing worse for a semiconductor company than not being able to sell enough product because you don't have the fabs is to not be able to keep your fabs running because you can't sell enough chips. Cycles happen.

 

[Tam]

...it can last a year or two even...

TSMC says can catch up with auto chip demand by end June -CBS

Taiwan Semiconductor Manufacturing Co Ltd (TSMC) (2330.TW), expects to be able to catch up with the "minimum requirement" of customer demand for auto chips by the end of June, its chairman told U.S. broadcaster CBS.

www.reuters.com

What I understand is it's similar to the Colonial Pipeline stoppage. It's not that there's no oil but it's a distribution problem. So even when the oil started to flow again, it takes some time to reach destinations.

 

[gnuarm]

TSMC says can catch up with auto chip demand by end June -CBS

Taiwan Semiconductor Manufacturing Co Ltd (TSMC) (2330.TW), expects to be able to catch up with the "minimum requirement" of customer demand for auto chips by the end of June, its chairman told U.S. broadcaster CBS.

www.reuters.com

What I understand is it's similar to the Colonial Pipeline stoppage. It's not that there's no oil but it's a distribution problem. So even when the oil started to flow again, it takes some time to reach destinations.

I don't follow the reasoning with that. The pipeline stopped supplying oil. Saying that was a "distribution" problem is a bit disingenuous. The distribution problem is a lack of gasoline to distribute. Now that the Colonial pipeline is flowing again there is still the distribution pipeline that has to be refilled to reach the end users.

With semiconductors there is a clear lack of supply. When an IC maker quotes a 52 week lead time, that's not a distribution issue either. The IC maker is the oil well.

It's hard to imagine this won't impact significantly all electronics suppliers. TV set makers are announcing price hikes. Autos use more electronics per unit that pretty much everything. I expect Tesla to be hit hard unless they find a way to get the parts they need when others can't.

I expect most forecasters were concerned about world wide supply of lithium, cobalt or rare earth metals, not beach sand.

 

[Tam]

I don't follow the reasoning with that...

The end result might be the same such as shortage supply at the consumer end and price hike but the reasons might be different.

It would be more serious if there's a shortage of raw materials at the source but that is not the case.

Some say the diamond is very expensive not because it is rare but because of the monopoly that gives us the illusion of rarity and it doesn't matter how many more diamond mines are discovered, the monopoly makes sure it controls the supplies.

The housing prices are increased right now but not because the workers are all dead and there's no one to build new houses or all the forests are all burned up and there's no more lumber in the world but because of the lag time of demands and supplies. When the demand was down for new houses, fewer new houses were built. And now the demand is up, it takes time to catch up.

Back to the automotive sector that canceled the chips due to low new car demand because of the pandemic: Now, the demand is back and it's just a matter of time to catch up as the article said:

""Today, we think we are two months ahead, that we can catch up the minimum requirement of our customers, before the end of June," he said.

Asked he meant the auto chip shortage would end in two months, he said "no".

"There's a time lag. In car chips particularly, the supply chain is long and complex. The supply takes about seven to eight months," Liu added."

It's just like a train that's been stationary at a train station. The reasons might be different If it's there because its wheels are missing and there's no way to get the wheels to fix it, that would be really bad.

If it's there waiting for more passengers and once the train is filled up with passengers, its starting speed is really slow, not very fast, but that is a good sign. There's a lag time between starting speed and cruising speed so we will get to the cruising speed as expected.

 

[gnuarm]

Back to the automotive sector that canceled the chips due to low new car demand because of the pandemic: Now, the demand is back and it's just a matter of time to catch up as the article said:

""Today, we think we are two months ahead, that we can catch up the minimum requirement of our customers, before the end of June," he said.

There is the fallacy. Remember that everyone involved is speaking from their own interests. The semiconductor shortage is not one company, it is nearly every one. There is a fundamental shortage other than just fabs. While beach sand is not limiting, turning it into wafers is limiting just as semiconductor fabs are limiting. Two more months may get TSMC caught up, but not the industry. TSMC doesn't make every chip, just the special order devices. Analog Devices makes many different types of chips as does TI, both are slammed with lead times out to a year. Any single device can prevent the vehicle from being ready to sell.

Asked he meant the auto chip shortage would end in two months, he said "no".

"There's a time lag. In car chips particularly, the supply chain is long and complex. The supply takes about seven to eight months," Liu added."

That's a bit of snow he is spreading. Larger consumers of semiconductors buy directly from the factory, not through distribution so no "complex" chain. But there are any number of hungry mouths to feed, so I guess it the mother bird problem.

I need a part that has a year lead time. So I'm switching to another part that is only 6 weeks. I'm lucky that the board I build was designed for both parts.

It's just like a train that's been stationary at a train station. The reasons might be different If it's there because its wheels are missing and there's no way to get the wheels to fix it, that would be really bad.

If it's there waiting for more passengers and once the train is filled up with passengers, its starting speed is really slow, not very fast, but that is a good sign. There's a lag time between starting speed and cruising speed so we will get to the cruising speed as expected.

Sorry the analogies are not so good. The problem is too many POs and not enough shipments of chips.

 

[DanCar]

Summary: The auto industry is acutely hurt by the semiconductor shortage because they like to pay only a few dollars for chips.

I worked at Intel for a few decades. I feel I know plenty about the semiconductor industry. I also worked with Intel's automotive division when it existed. Not much of this is said in the news, so I will say it here in hopes that it will help. Many of the chips used by the auto industry are produced by older semiconductor FABs. Large companies like Intel sell their older FABs to firms that sell to the auto industry. The auto industry likes buying chips that are super cheap as in a few dollars.

Since capacity is somewhat fixed by release of older FABs, there isn't an easy way to increase capacity. Secondly since the auto industry likes to pay only a few dollars for their chips there isn't much incentive for companies to create new capacity. Intel spends billions of dollars on building a new FAB.(1) Steppers for new FABs cost tens of millions, as an example of why a new FAB is so expensive. Intel has been making press announcements about building new FABs for the chip shortage. What Intel doesn't say is that none of those FABs will build chips for the automotive industry. Those FABs will build Intel's most expensive chips like Xeons that cost more than $1K each.

I am not familiar with TSMC business model, but TSMC seems to contradict some of what I said: TSMC says can catch up with auto chip demand by end June -CBS TSMC says they will be able to meet minimum level of demand by July. Don't know what "minimum level" or "minimum requirement" means.

 

[DanCar]

Japan's Renesas sees fire-damaged chip plant back to full capacity by mid-June

Renesas Electronics Corp (6723.T) on Tuesday said restoring full production capacity at a fire-damaged chip plant in Japan would take longer than expected, predicting a return to normal by mid-June rather than the previously estimated end of May.

www.reuters.com

Chip maker in Japan says it will be back to full production after fire by mid June.

 

[MC3OZ]

This YouTube video shows how important TSMC is to the world economy and how hard it would be to build a similar company anywhere.

My conclusion - This isn't something the US government can afford to ignore, the US needs a domestic capability to manufacture chips.
Samsung already has a fab in the US, and TSMC is building one:-

Why TSMC’s Arizona Fab Is Strategic For Tech’s Future In The US

While the actual push to build this fab in Arizona is ripe with political overtones, it may turn out to be one of the better strategic moves for the US as our country deals with multiple threats from China in the future.

www.forbes.com

 

[DanCar]

TSMC building a chip plant in Arizona:

TSMC says has begun construction at its Arizona chip factory site

Taiwan Semiconductor Manufacturing Co Ltd (2330.TW) (TSMC) has started construction at a site in Arizona where it plans to spend $12 billion to build a computer chip factory, its chief executive said on Tuesday.

www.reuters.com

None of the new plants from TSMC, Intel or others, will help directly with the micro controller chip shortage. New plants don't build $1-$6 micro controllers that are used by the auto industry. Instead new FABs build chips costing hundreds to thousands of dollars, which help pay for the billions it costs to make a FAB.

 

[Mase408]

Summary: The auto industry is acutely hurt by the semiconductor shortage because they like to pay only a few dollars for chips.

I worked at Intel for a few decades. I feel I know plenty about the semiconductor industry. I also worked with Intel's automotive division when it existed. Not much of this is said in the news, so I will say it here in hopes that it will help. Many of the chips used by the auto industry are produced by older semiconductor FABs. Large companies like Intel sell their older FABs to firms that sell to the auto industry. The auto industry likes buying chips that are super cheap as in a few dollars.

Since capacity is somewhat fixed by release of older FABs, there isn't an easy way to increase capacity. Secondly since the auto industry likes to pay only a few dollars for their chips there isn't much incentive for companies to create new capacity. Intel spends billions of dollars on building a new FAB.(1) Steppers for new FABs cost tens of millions, as an example of why a new FAB is so expensive. Intel has been making press announcements about building new FABs for the chip shortage. What Intel doesn't say is that none of those FABs will build chips for the automotive industry. Those FABs will build Intel's most expensive chips like Xeons that cost more than $1K each.

I am not familiar with TSMC business model, but TSMC seems to contradict some of what I said: TSMC says can catch up with auto chip demand by end June -CBS TSMC says they will be able to meet minimum level of demand by July. Don't know what "minimum level" or "minimum requirement" means.

100% correct. I also work in Semiconductor and the Auto industry is at the bottom of the pecking order for priority and allocation because of the low cost.
Demand is filled for Asics, Memory, and FBGA's that drive higher margins.

I think the Auto industry will get its share to keep minimum lines running, but supply wont really catch up until early next year.

 

[Tam]

It's improving and not getting worse. It's not the apocalypse.

GM lifts forecast as chip shortage eases, stock hits record

Shares of General Motors Co. closed at a record high Thursday after the company said its efforts to manage the global computer chip shortage have worked better than expected, so it’s financial results will improve

abcnews.go.com

“We certainly see it starting to get better in the second half, and hopefully getting to a point where we've reached normalization in 2022,”

"Credit Suisse analyst Dan Levy said GM has enough dealer stock to supply only 22 days of demand, when it normally has 80."

"GM also said it's starting to install computers in midsize trucks that were built without them due to the shortage. Those vehicles will be shipped in early July"

 

[DanCar]

CEO of largest U.S. chip foundry explains why semiconductor shortage could last through 2022

Currently, all of GlobalFoundries' manufacturing capacity is booked — and it expects semiconductor supply to lag behind demand until 2022 or later.

www.cnbc.com

The shortages are for other parts cars need, like radar chips, which don’t necessarily require the most advanced manufacturing available at the time.

 

[gnuarm]

TSMC building a chip plant in Arizona:

TSMC says has begun construction at its Arizona chip factory site

Taiwan Semiconductor Manufacturing Co Ltd (2330.TW) (TSMC) has started construction at a site in Arizona where it plans to spend $12 billion to build a computer chip factory, its chief executive said on Tuesday.

www.reuters.com

None of the new plants from TSMC, Intel or others, will help directly with the micro controller chip shortage. New plants don't build $1-$6 micro controllers that are used by the auto industry. Instead new FABs build chips costing hundreds to thousands of dollars, which help pay for the billions it costs to make a FAB.

People keep talking as if the only way fabs end up making low end microcontrollers is for them to be retired from use making high end chips. That's simply not true. Fabs of a range of capabilities are built at any given point in time. It is true that few plants economically producing 150 nm devices would be rebuilt if they were destroyed, but that's not to say they would not build a new plant with slightly better capabilities such as 60 or 90 nm feature sizes and make the 150 nm chips on that. It would still be profitable and there is nothing to prevent this from happening technologically. In fact the equipment would be less expensive today than when it was originally built.

Bottom line is if there is demand for lower end devices the factories can be built if there is reason to think the demand will last and is not just a bubble from over buying due to a perceived shortage.

 

[Terminator857]

Dingell Introduces Legislation to Address Automotive Semiconductor Chip Shortage

debbiedingell.house.gov

... address the semiconductor chip shortage by increasing incentives to invest in facilities and equipment to domestically manufacture critical chip components. The Mature Technology Node Resiliency and Manufacturing Act of 2021 would authorize $2 billion for fiscal year 2022 to fund the production of mature semiconductor technologies in the United States, important to the automotive, defense, and other manufacturing industries.

“The chip shortage is hurting the auto industry, union workers, and our nation’s competitiveness by the hour. Within the last few months, many auto plants in the U.S. have shut down for lack of parts, workers are struggling to make ends meet or are being laid off, car prices are skyrocketing, and consumers are feeling the impact,” said Rep. Dingell. “Robust funding for domestic semiconductor manufacturing is critical to ensure we stay at the forefront of innovation and technology – especially in the auto industry – and aren’t relying on international competitors for supplies. My home state of Michigan is the center of the auto industry, and I’m working with all of my colleagues on both sides of the aisle to address this crisis head on.”

 

[Mase408]

New car mark-ups are only going up in the past few months. And no major auto Mfg has increased their capacity either.

 

[Terminator857]

https://www.reddit.com/r/CoronavirusMemes/comments/oucbm5

 

[Terminator857]

Chip Shortage Might Turn Into Market Saturation, Analysts Worry

The global chip shortage is far from over, and analysts have several outlooks regarding its evolution. While some estimate that the chip shortage will outlast the International health crisis, other analysts warn that it could lead to market saturation in the near future.

www.autoevolution.com

... chip manufacturers have responded to increasing demand with investments in new capacity. Once those investments will be completed and supply will slowly, but surely, meet demand, analysts warn there is a risk of chip glut, ...
In May, South Korea announced plans to invest $450 billion to boost its chip production. The investment is channeled through several channels, including tax breaks, for companies that operate in the country.

Toyota and Mitsubishi Planning Chip Manufacturing Joint Venture with TSMC

TSMC could eventually build a Japanese plant specifically focused on chip manufacturing as part of a joint venture with Toyota, Mitsubishi, and Sony

www.autoevolution.com

The joint venture could attract investments of over $14 billion, though, for the time being, it’s not exactly clear how much Toyota and Mitsubishi are willing to pour into this project.

 

[Terminator857]

Elon complaining about getting enough standard parts from Japanese Renesas Semiconductor and German Bosch automotive supplier.

https://twitter.com/x/status/1425765210007216134

Article based on tweet:

Tesla Model 3 News and Reviews | InsideEVs

Get the latest on new Tesla Model 3 models including first drives, in-depth reviews, concept car photos, new features, recalls and more.

insideevs.com

 

[Doggydogworld]

In May, South Korea announced plans to invest $450 billion to boost its chip production. The investment is channeled through several channels, including tax breaks, for companies that operate in the country.

That's over 25% of South Korea annual GDP! The 450b is spread out over 9 years, but still it's like 3% of GDP each year.

 

[gnuarm]

Dingell Introduces Legislation to Address Automotive Semiconductor Chip Shortage

debbiedingell.house.gov

... address the semiconductor chip shortage by increasing incentives to invest in facilities and equipment to domestically manufacture critical chip components. The Mature Technology Node Resiliency and Manufacturing Act of 2021 would authorize $2 billion for fiscal year 2022 to fund the production of mature semiconductor technologies in the United States, important to the automotive, defense, and other manufacturing industries.

You don't seem very knowledgeable of the semiconductor industry or the economics. It has little to do with "incentives". It also takes years to simply build a new facility. Then there is the issue of your term "critical chip components". The chips ARE the components. How do you know which to make?

$2 billion won't pay to build a single facility, much less an industry. Try ten times that much and you might make a dent in the shortage. That's why there's a shortage, supply and demand got out of whack and now everyone is overbuying to assure supply. With the severely constrained supply this makes lead times stretch out. This is no different from the time Johnny Carson created a toilet paper shortage simply by suggesting it could happen.

“The chip shortage is hurting the auto industry, union workers, and our nation’s competitiveness by the hour. Within the last few months, many auto plants in the U.S. have shut down for lack of parts, workers are struggling to make ends meet or are being laid off, car prices are skyrocketing, and consumers are feeling the impact,” said Rep. Dingell. “Robust funding for domestic semiconductor manufacturing is critical to ensure we stay at the forefront of innovation and technology – especially in the auto industry – and aren’t relying on international competitors for supplies. My home state of Michigan is the center of the auto industry, and I’m working with all of my colleagues on both sides of the aisle to address this crisis head on.”

You need to learn how to read political talk and extract the truth from the exaggeration.