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No Quick Fix for Auto Chip Shortage

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An automotive assembly line.

Microcontrollers used in automobiles can sell for a dollar or less but, an analyst noted, a $1 part can prevent a $40,000 car from shipping.

Credit: pool new/Reuters

The production shortage plaguing the market for automotive chips is a combination of new and old problems, none of which can be easily solved.

Ford Motor last week was the latest auto maker to show the fallout. The company said Thursday that it is cutting production by up to 20% in the first quarter due to its inability to procure enough chips. Rival General Motors said a day earlier that it planned to trim production at North American factories due to the shortage. Volkswagen  sounded an early warning in December about the issue, which is affecting auto makers across the board that need chips to control everything from infotainment systems to power management to systems monitoring.

The problem stems from actions both recent and distant. A sudden drop-off in sales caused auto manufacturers to cut component orders early in the pandemic. Then demand rebounded at an unfortunate time as chip manufacturers were operating at capacity to produce components for hot, high-price items such as the latest generation of iPhones and artificial intelligence chips for data centers. Industry giant Taiwan Semiconductor Manufacturing,  or TSMC, said in its earnings call last month that the automotive market accounted for only 3% of its revenue in the fourth quarter compared with 51% for smartphones and 31% for high-performance computing chips.


From The Wall Street Journal
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