Ford Motor Company on Semiconductors and GlobalFoundries Q4 2021 Results

[Daniel Nenni]

From the recent call:

Jim Farley - President & Chief Executive Officer

Thank you for your question. Perhaps the biggest gift for all the pain we're going through now in semiconductors is that we have very painfully learned the lesson that we cannot manage the supply chain for these key components as we have.

In fact you could argue that in the change of transition to these digital electric vehicles that supply chain could be one of the biggest advantages a particular company has or doesn't have. The way we look at it is the key electric components memory chips semiconductors. I would break semiconductors into two types. I'll come back with GlobalFoundries in a second. Feature-rich chips that we still use a lot. A window regulator doesn't need to have a 4-nanometer chip. And the advance -- but we also have sensors power electronics for our inverters, the batteries themselves all the way back to the mine, the inverters of different battery. Chemistries itself have different raw materials and kind of ecosystems that support them.

So this is a very important topic for the company. How different it is? It's really different. We need different talent at the company. We need physical inspection of the actual producers. We need direct contracts with them. We need to design the SoC ourselves. We need to direct in the case -- in some cases to even direct prefer build to print or actually use supplier XYZ to get out of where we've been. And this takes talent. It takes a different approach. It takes more resources.

On GlobalFoundries, it's kind of the first big bet, but there'll be many, many more coming for us. We're very dependent on TSMC for our feature-rich nodes. Obviously, the capacity is at risk over time as the industry moves to more advanced nodes including us.

And as I said we're going to need feature-rich nodes for many years to come. GlobalFoundries knows how to build them. They know to build them in the United States. We can partner with the government depending on the CHIPS Act to capacitize here. It will be a few years until we benefit from that but it's a really big thing to descale ourselves on the feature-rich chips from the current ecosystem that we depend on around the world. And I think GlobalFoundries is a really interesting deal when we get into the details.

We have to put cash up when we participate. Those feature-rich semis will be used by other companies industrial companies, not just Ford. It's a really interesting deal. And I was talking to the US company. You can expect the same kind of thing on advanced nodes and all the other components I mentioned including more deals on the raw material for various types of battery chemistry. And this is a culture change at Ford. As I said this is part of the rhythm change between ICE and BEV.

Ford Motor Company's (F) CEO Jim Farley on Q4 2021 Results - Earnings Call Transcript

Ford Motor Company (NYSE:NYSE:F) Q4 2021 Earnings Conference Call February 3, 2022 5:00 PM ETCompany ParticipantsLynn Antipas Tyson - Executive Director of...

seekingalpha.com

 

[NVS]

Interesting remark about designing the SoC themselves!

 

[hist78]

"We can partner with the government depending on the CHIPS Act to capacitize here. It will be a few years until we benefit from that but it's a really big thing to descale ourselves on the feature-rich chips from the current ecosystem that we depend on around the world."


Does anyone know the meaning of "descale" and "feature-rich" from his statement?

 

[jms_embedded]

This is certainly news in an earnings call, but it's not the first time Ford has mentioned this.

From the Nov 18, 2021 Washington Post:

The costs have been huge: The global auto industry will produce 7.7 million fewer vehicles this year because of the chip shortage, costing it $210 billion of revenue, according to consulting firm AlixPartners.

The related collapse in auto sales to consumers shaved more than two percentage points from U.S. GDP growth in the third quarter.

“It’s critical that we create new ways of working with suppliers to give Ford — and America — greater independence in delivering the technologies and features our customers will most value in the future,” Ford president and chief executive Jim Farley said in a statement.

Ford doesn’t currently conduct chip-related research and development in-house but is working to develop that expertise, spokeswoman Jennifer Flake said.

Though details are still in flux, “I think what we’re hoping to do is work together jointly on R & D for a specific chip made just for Ford’s needs,” she said. “And likely [Ford] would say to GlobalFoundries, ‘You guys have the manufacturing expertise, you should go and manufacture it.’”

Any chips for Ford would likely be made at the GlobalFoundries factory in Malta, Hogan said.

Semiconductors are the brains behind an increasing number of commonly used consumer devices, from smartphones and laptops to kitchen appliances, vacuum cleaners and automobiles.

In recent decades, semiconductor technology largely evolved to fit the needs of the personal-computer industry, then cellphone and smartphone makers, Hogan said.

Automakers were “sort of happy to benefit from whatever technology happened to have been created,” he said. “And they would find a way for their supply chain to use those devices to accomplish a different goal. So the same microcontroller that might have been in a toaster oven was modified to go in and move your window up and down.”

But as the automotive industry develops a new generation of vehicles, including electric and autonomous cars, it has a greater need to design its own chips, Hogan said. Special semiconductors to manage power supply in battery-operated cars will be a top priority, he said.

Tesla already designs its own semiconductors, he said, and other automakers will follow.

@Daniel Nenni I don't know if he/Ford would be willing to let you, but an interview with Doug Field at Ford would probably be very interesting.

 

[hist78]

"And as I said we're going to need feature-rich nodes for many years to come. GlobalFoundries knows how to build them. They know to build them in the United States. We can partner with the government depending on the CHIPS Act to capacitize here."

When Apple needs TSMC's help to make chips, Apple writes checks to TSMC to make it possible.

When GM needs Globalfoundries' help to make chips, GM expects governments to write checks to make it possible.

We already knew the great performance of Apple/TSMC partnership. But how much can we expect from GM/Globalfoundries partnership?

 

[Xebec]

"We can partner with the government depending on the CHIPS Act to capacitize here. It will be a few years until we benefit from that but it's a really big thing to descale ourselves on the feature-rich chips from the current ecosystem that we depend on around the world."


Does anyone know the meaning of "descale" and "feature-rich" from his statement?

Descale probably means reduce dependency on ..

Re: Feature Rich chips - My guess is that they're using chips with more features than they need in some areas of the car, and he appears to be making the statement that these "feature rich" chips are harder to source, or at least harder to replace when there's supply chain challenges. (In contrast, he's talking about designing purpose built chips for what his cars/trucks need them for - giving them a little more predictability and control over the supply chain.)

 

[semiman]

Feature-rich chip? hm... I think most people here will think of Application Processors since APs have tons of features inside. But from auto maker's perspective, the actual function of chips doesn't seem to matter. For them, "car feature(wipers, headlights...etc) + whatever chip(s)" is a feature, so they're calling 200mm chips feature-rich(for example, out of 100 features, 90 features need chips from 200mm). Not surprising that they want to reduce the dependency(descale?) of 200mm since everyone in auto must have blamed 200mm for failure.

Kinda interesting to see difference between semi industry and auto industry. But somehow I have a gut feeling that's also a part of the reason why auto suffered so much shortage...

 

[hist78]

Feature-rich chip? hm... I think most people here will think of Application Processors since APs have tons of features inside. But from auto maker's perspective, the actual function of chips doesn't seem to matter. For them, "car feature(wipers, headlights...etc) + whatever chip(s)" is a feature, so they're calling 200mm chips feature-rich(for example, out of 100 features, 90 features need chips from 200mm). Not surprising that they want to reduce the dependency(descale?) of 200mm since everyone in auto must have blamed 200mm for failure.

Kinda interesting to see difference between semi industry and auto industry. But somehow I have a gut feeling that's also a part of the reason why auto suffered so much shortage...

If this type of "feature-rich" (but not Apple's or Qualcomm's feature-rich) is what Ford wants, I think they better work with tier 1 suppliers like Bosch or Denso instead of going directly to foundries.

Ford's expection on low cost and smaller order quantity is hard for them to go alone. If Ford attempts to aggregate several carmakers' similar orders together and send the order to a foundry, then they are getting into the business of Bosch and Denso. It will become very tricky to justify this type of venture.

 

[semiman]

If this type of "feature-rich" (but not Apple's or Qualcomm's feature-rich) is what Ford wants, I think they better work with tier 1 suppliers like Bosch or Denso instead of going directly to foundries.

Ford's expection on low cost and smaller order quantity is hard for them to go alone. If Ford attempts to aggregate several carmakers' similar orders together, then they are getting into the business of Bosch and Denso. It will become very tricky to justify this type of venture.

Exactly. We already know that even Google and MS needed to be super big to start designing chips. Even if Ford's objective is to get less complicated parts like MCU, still 'design to manufacturing is not something they can say so easily. It's much better to work with suppliers who already know semiconductor dynamics.

Not having in-house chips or not working directly with foundry weren't the culprits behind the shortage. The auto industry failed to understand the dynamics behind their suppliers(semiconductors). This still applies to in-house designs(or whatever clever way to 'descale'). The best way to do that is not using semiconductors while keeping features same, but that'll be quite challenging. It'll be much better if they understand not all components can be treated the same way, instead of trying to make their semiconductors JIT friendly...

 

[jms_embedded]

Not having in-house chips or not working directly with foundry weren't the culprits behind the shortage. The auto industry failed to understand the dynamics behind their suppliers(semiconductors). This still applies to in-house designs(or whatever clever way to 'descale'). The best way to do that is not using semiconductors while keeping features same, but that'll be quite challenging. It'll be much better if they understand not all components can be treated the same way, instead of trying to make their semiconductors JIT friendly...

I keep hearing that kind of blame on this site, and while I agree that the auto industry had a major role in contributing to their own pain... it's beyond that. As of January 2022, Toyota has had recent shortfalls in supply -- this is the same Toyota that was the healthiest among the auto manufacturers in early 2021, because they'd been more conservative about maintaining key inventory items after learning lessons from problems in 2011 due to the Fukushima earthquake. But at some point that inventory runs out, no matter how much of it you have, as long as supply remains below demand.

The auto chip shortage that came to light in early December 2020 has been and will be an extended event with numerous complicating factors.

I'll give the auto companies credit for the first six months of pain; then we all need to look around a little more carefully before throwing stones.

 

[semiman]

I keep hearing that kind of blame on this site, and while I agree that the auto industry had a major role in contributing to their own pain... it's beyond that. As of January 2022, Toyota has had recent shortfalls in supply -- this is the same Toyota that was the healthiest among the auto manufacturers in early 2021, because they'd been more conservative about maintaining key inventory items after learning lessons from problems in 2011 due to the Fukushima earthquake. But at some point that inventory runs out, no matter how much of it you have, as long as supply remains below demand.

The auto chip shortage that came to light in early December 2020 has been and will be an extended event with numerous complicating factors.

I'll give the auto companies credit for the first six months of pain; then we all need to look around a little more carefully before throwing stones.

Thank you for the comment! I also know that there's more than that like someone in the middle piling up supplies(and tons of unknowns to me). I just wanted to see more clever comments from auto makers than 'we'll work with GloFo and TSMC as well'. But that comment also makes sense if that statement is to emphasize CHIPS act thus making more favorable supply conditions by reducing auto chip prices.