Europe’s largest semiconductor company, Infineon, has warned that car companies need “a different model” for procuring critical chips, after supply constraints brought assembly lines around the world to a sudden halt.
“The auto industry cannot say: ‘OK fine, we don’t need [any more chips], and then come back later and say: ‘Now we need them’,” chief executive Reinhard Ploss told the Financial Times.
“They have to consider the long lead times [in the semiconductor sector] of about half a year,” added Ploss, whose company is one of the world’s leading suppliers of microcontrollers and sensors that power modern vehicles.
Bottlenecks in the supply of semiconductors to the auto industry began to emerge late last year, after an unexpected rebound in demand for cars coincided with a booming consumer electronics market.
Carmakers including Volkswagen, General Motors, Ford and Renault were caught short, and had to idle or rearrange production.
Approximately 1m fewer units will be produced this year as a result across the sector, according to IHS Markit, as the constraints stretch into the second half of the year.
The shortages have led some car brands, including Porsche and Mercedes, to take another look at their supply chains, which for decades have relied on “just-in-time” deliveries, and consider holding larger stockpiles.
Ploss, whose customers include tier 1 auto suppliers Bosch, Continental and ZF, said the car industry could not expect chipmakers such as Infineon to “take all the risk of holding the inventory”.
“That would be an unbelievably high cash flow risk for us,” he added, pointing out that semiconductors also had a limited shelf life, because they could easily be contaminated.
Industrial companies already have longer-term contracts with semiconductor suppliers, the former Siemens executive said, “which provides a certain level of commitment, even in weaker market situations”.
The auto industry’s woes are largely down to a lack of spare production capacity at foundries such as Taiwan’s TSMC, which does some manufacturing for Infineon, and is the world’s largest contract chipmaker.
As a result, the Biden administration, and EU leaders, have called for more investment in domestic production facilities.
But Ploss said that the automotive sector, which accounted for only about 10 per cent of the global semiconductor market, would continue to find itself squeezed by larger clients, such as smartphone makers, and needed to build more “resilience” into its supply chains.
“For them not to deliver a car because of a two dollar device is a no-go,” he said. “We as supplier are doing everything we can to avoid such a situation for our customers.”
Source: Economy - ft.com
