Carmakers scramble to cope with chip shortage

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Carmakers scramble to cope with chip shortage

MUNICH, Nov 26, Reuters - Whether buying computer chips directly from manufacturers, reconfiguring cars or producing them with missing parts, automakers have to get creative to cope with the global shortage of semiconductors.

The auto industry is hit hard due to the shortage due to supply problems and a surge in demand for consumer electricals during the epidemic. Millions of vehicles are not being produced worldwide because important parts are missing.

With the problem lasting longer than anticipated, manufacturers like Daimler and Volkswagen have had to rethink production strategies.

Car manufacturers usually buy parts from major suppliers, such as Bosch and Continental, which in turn buy from suppliers further down the chain.

In some cases that has led to a lack of transparency, said Ondrej Burkacky, senior partner at McKinsey.

He said there was the fallacy of thinking that you had a choice between two suppliers, but the truth is that they both had the chips made in the same foundry.

According to Daimler Purchasing Manager Markus Sch fer, that is now changing.

The German manufacturer of Mercedes-Benz cars has set up a direct line of communication with all chip suppliers, including wafer producers in Taiwan, he said at the IAA auto show in September.

Volkswagen boss Herbert Diess speaks about strategic partnerships that his company has entered into with manufacturers in Asia.

Stefan Bratzel, from the Center for Automotive Management, said chip suppliers need to be treated differently because of their strategic importance to the industry.

He said that you've seen the problems that arise when you treat chip companies like other suppliers and stop calling.

McKinsey said that carmakers should consider direct investments in production or longer contracts with terms of more than 18 months.

He said that not much of it has been implemented yet.

In the meantime, vehicle developers are doing their part to help manufacturers manage the supply crunch.

Annette Danielski, chief financial officer of Volkswagen's Traton trucking unit, said the company was trying to clear some space on the motherboards of control systems.

She said that if we change the software, we can use fewer semiconductors and achieve the same functionality. It takes a long time to get a change because the regulatory authorities intervene, but there are areas where you can change things quickly. Daimler relies on new designs for control units. The company's head of purchasing Sch fer said that these are designed to work with an alternative that can be used in the event of delivery problems rather than using one specific chip.

Tesla is considered a model for this.

The software was reprogrammed within three months so that other less scarce chips could be used, enabling the U.S. electric carmaker to weather the crisis better than many others.

General Motors will partner with chip manufacturers like Qualcomm, STM and Infineon to develop microcontrollers that combine several functions previously controlled by individual chips.

A company spokeswoman said they wanted to create an ecosystem that is more resilient, more expandable and always available.

Some carmakers are stockpiling, or what BMW calls hole shoring. The whole car is built, except for a missing part, and can be completed relatively easily when it shows up.

Other automakers are using this strategy. Some vehicles are delivered without certain functions controlled by chips.

Semiconductors are also conserved for high-quality vehicles, like electric cars, while customers face longer wait times for low-priced combustion engines.

The strategy is slowly reaching its limits. Volkswagen stopped the production of electric cars in its Zwickau plant in Germany.

How well these coping strategies work is not yet clear.

The bill will be presented in mid or late 2022, when you can see who came out of the crisis well and who did not make it so well, said McKinsey's Burkacky.