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210 Billion Lost, Semis Massive Leverage, TSM a Trillion-dollar Market Cap?

Arthur Hanson

Well-known member
The auto business losing 210 billion in business due to the chip shortage really brings home the massive leverage the chip shortage brings to the world economy. As intelligence in everything is increasing at an ever-accelerating rate the need for growth in all sectors of the chip market has never been more important. The only question now is how fast the industry can grow and especially TSM which has had a lock on the high end for years. Any thoughts, observations and comments appreciated

 

Daniel Nenni

Admin
Staff member
The automakers need to man up and take control of their silicon. This is deja vu of the smart phone market. Apple took control of their silicon and advanced the software side into a hugely profitable business. Automakers need to do the same. Software (AI) is critical to all businesses now and matching it up to the silicon early and often is the competitive edge. Tesla is just the beginning, all automakers will develop their own chips and take software to a new level, absolutely.
 

Daniel Nenni

Admin
Staff member
The shortage is getting worse


This is a shortage of manufacturing capacity Dan, design capa is not in shortage.

Not true. It's a supply chain issue. I'm on calls every week with supply chain people. Apple and AMD don't have shortages because TSMC is a big part of their supply chain (Wafers and packaging). I just bought an iPhone 13 and it will ship in two weeks. AMD lead times have been cut in half. Why do some companies have shortages and others don't? Supply chain management. If you buy off the shelf chips you are at the mercy of a very complicated supply chain, absolutely.

Did you check the author of the article?

Jeanne Whalen, Washington, D.C.
Reporter covering business around the world
Education: Cornell University, BA in English


A real semiconductor expert there.....
 

BobbiMac

New member
Anybody checking on what's missing at the automakers? I am guessing that the shortage is various modules made for the automakers by small and medium size suppliers. It's likely that these suppliers were whipsawed badly when the car guys cut there forecasts. Anybody notice that there doesn't seem to be a shortage of Japanese or Korean cars, at least here on the West Coast. Do they perhaps manage the supply chain better than Detroit?
 

benb

Active member
I haven’t heard a really satisfying explanation why the shortage affects this company but not that. It seems to change month by month.

One month Apple is saying they will delay certain products because of chip shortage.
Then as Daniel indicates this doesn’t materialize, a solution is found.
Tesla has a shortage one month.
Then Tesla changes the chips they use and rewrite the software and now the problem is solved.

What this looks like, and I’m not relying on a journalist here, just my opinion, is Tesla and Apple have resources and depth to change things on the fly, change the software and hardware, to mitigate the shortages. While the legacy car makers aren’t so well equipped or nimble and just complain a lot and wait for bailouts.
 

hist78

Active member
The automakers need to man up and take control of their silicon. This is deja vu of the smart phone market. Apple took control of their silicon and advanced the software side into a hugely profitable business. Automakers need to do the same. Software (AI) is critical to all businesses now and matching it up to the silicon early and often is the competitive edge. Tesla is just the beginning, all automakers will develop their own chips and take software to a new level, absolutely.
Throughout the past many years, I recognized that auto manufacturers like to think they are the center of the universe. Now in this second decade of 21st century, most of them (including Tesla) are much smaller than many other semiconductor key customers (Google, Apple, Amazon, etc.). It's not only their own revenue are smaller than those new players but also the quantity and unit price of semiconductor products they purchased every year are much smaller.

It won't work well if auto manufacturers are demanding the best treatment, cheapest price, and best delivery time while they are actually the second tier or even third tier semi customers.
 

HilltopEcon

New member
Shortages exist in pockets of many of the industries I track for clients, and it seems to me semiconductors are an easy "target" to blame. I've seen shortages in appliances, liquor, instrumentation, auto windscreens, heavy equipment, building materials, etc., with most blamed on semiconductors. The real culprit at a macro level appears to me to be an unbalanced global supply-demand situation still related to the pandemic. Shipping issues, especially ocean freight, are profound and hardly impact semiconductors directly (except some raw materials and equipment).

hist78's comments are worth underscoring, as many industries that dominated in the US back in the 70s and 80s lost their dominance in part to a misguided view of their importance to their supply chains (upstream and downstream). It still looks as if it's a disrupted supply chain, not a "shortage of chips" that is distorting a significant number of chip-containing industries. And it sure is fun trying to figure it out, with the best commentary on the topic here on the wiki, in this humble economist's opinion.
 

benb

Active member
hist78 is spot on about the issue being the difficulty serving small batches of auto chips in a fab that needs to output vastly more for smartphones. There are some compensations though. Automotive parts have higher quality standards and compensating higher prices.

I think another issue is the change from primitive microcontrollers on 200mm wafers, in ancient process, to modern microcontrollers in Finfet 300mm wafers. The auto world could count on a certain kind of short cycle time service from 200mm fabs while 300mm fabs supplying finfet wafers are at capacity, have a long (and lengthening) cycle time, and it’s not the service level they expected.

They used to have dedicated or near dedicated automotive parts fabs. There are no 300mm fabs with a pure dedicated automotive focus though.
 

hist78

Active member
Put this 6-month 200,000 vehicles into some comparison. It's about 1,096 cars per day that GM can't produce due to semiconductor shortage. GM sold 2.5 million cars in North America and 6.8 million cars worldwide in 2020.

On the other hand Apple sold 206 million units of iPhone in 2020. That's averagely 564,383 units of iPhone sales (and produced) per day.

Obviously the semiconductor content in a car is different from what's inside a smartphone. But it's very clear that the logistic/supply chain challenge is drastically different in scale between auto industry and smartphone industry.

So if a GM chip buyer meets his sister who works for Apple as a chip procurement manager during their family Christmas gathering, the sister probably will ask her brother: "Dear, what's your problem?"
 
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Daniel Nenni

Admin
Staff member
It will be interesting if each auto maker is also also a fabless semiconductor company.


They have to follow Tesla so yes car companies will start making their own chips. Tesla is also becoming more "agile" in regards to chip suppliers:

“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.”

 

Paul2

Active member
They have to follow Tesla so yes car companies will start making their own chips. Tesla is also becoming more "agile" in regards to chip suppliers:

“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.”

We lost our whole firmware dev team of 6 people to one auto company from Bavaria: 6 digits salaries for everyone, signing, and referral bonuses, and an immigration lawyer taking care of every aspect of their relocation for them.

Try beating that for a no-name engineering company.
 

hkwint

Member
I haven’t heard a really satisfying explanation why the shortage affects this company but not that. It seems to change month by month.
Companies have different suppliers, clients have different priorities at their suppliers, and VUCA messes with planning on a weekley basis.
It used to be a monthly planning or so, but now it changes each three days.

What this looks like, and I’m not relying on a journalist here, just my opinion, is Tesla and Apple...

...are not the companies with stringent release procedures. For them, it's easier to change suppliers or parts.

If an iPhone fails, if it's the design, Apple blames the customer.
Tesla sells an ADAS (Level 2), doesn't install lidar / radar, sometimes the software has weird blimps, but Tesla calls it autopilot. And people accept it.

Now, as you might have guessed, the more vested car brands don't have the luxury to blame the clients in case of an accident, or to have a "to be improved" driver assistance system which they can fix OTA.
 

hkwint

Member
Anybody checking on what's missing at the automakers?

My company supplies a special metal part (which nobody else can make), and the the most "stupid" things are missing to fabricate just that 1 part.

Now, if a ship is stuck at Suez, and a few tonnes of metal is stuck over there, people understand you can't produce metal parts without metal.

But stuff that happens is, you need to place it in - let's say plastic bags, as agreed with the customer, but there's a shortage of those bags.
The thing is, if that's the package which is agreed upon, you can't swap it for something else. That one is released and tested, so you either use that one or you don't deliver the customer at all. Almost like the pharma sector.

Or you need a sensor to fix a machine, but that sensor takes 4 months to deliver. Or you need a 4 mechanics to visit the factory to fix things, could be something as stupid as a stuck sewage or some acoustical research to scan for the need of maintenance. But there's COVID-rules; those suppliers cannot be too close to each other, not on the same day and so on. Or maybe there's some COVID-cases and one shift is suspended.

I know this forum is semi-focused; and that's why some people may assume semi has a "so special" place and is unlike anything else, and somehow the situation with semiconductors is special in the supply chain issues of car companies.

But it's not, there's far more missing which doesn't make the news. Even a lack of - lets say plastic bags - could halt a car factory.
Of course, for semiconductors the supply chain is more complex and lead times are longer, true. But there's far, far more going on right now.

Let's say you order metal parts for safety belts, but the supplier fired people because in 2020 the orders shrunk drastically. Now, it's pretty hard to restart it, because those components are safety related. You need to train new personnel, and they need to sign the documents of becoming responsible in case of negligence. If I worked at Foxconn, I wanted to take some shortcuts to save time and mony and sold some defect products for iPhones, well Apple won't be happy but I don't end up in court. Liability has pretty far reaching effects in organizations.
Therefore it's easier to swap a chip for cartainment, than a supplier for safety belts. And you can't really sell a car without a safety belt, can you?

The interesting thing is, there's this whole plan for Germany / US / Japan to have "in country" chip manufacturing.
But I don't see any initiative to "insource" plastic casting / metal forming (leadframes anyone?)
Same thing for chemicals, like basic stuff like paracetamol, or the now famous ABF shortage which almost single handedly caused the GPU shortage AFAIK.
 
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count

Active member
I've definitely seen COVID challenges in manufacturing related to not being able to get the right people on site to do a job. The place I previously worked needed some specialized technicians from one of our suppliers but those technicians were based out of another country. Due to travel restrictions it took an extra month of coordination to get the required travel exemptions and visa approvals.
 

Daniel Nenni

Admin
Staff member
Agreed, COVID and climate change have devastated the worldwide supply chain. I mentioned a while back that I noticed a growing number of ships backed up in the San Francisco Bay and out the Golden Gate. The word on the docks is that not only is COVID causing personnel shortages but COVID protocols are killing productivity. The airline industry is facing a different kind of personnel issue. In addition to COVID, pilots are aging out and they can’t hire and train replacements fast enough.

So no, it's not a semiconductor manufacturing capacity problem. It's a COVID problem and I don't see it going away anytime soon.
 
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