Automotive Supply Chains

6 Dec 2021 • 6 minute read

I'm sure you've heard that there are lots of supply chain issues. Container ships stacked up outside Los Angeles and Long Beach ports. A shortage of truck drivers. Empty containers all on the wrong side of the Pacific. But generally speaking, these issues don't affect electronics too much. One transportation issue that does affect electronics is space in cargo holds. Most air-freight is not shipped in special cargo planes but in the holds of regular passenger planes. But there is limited international travel and so there is air freight that remains constrained.

There seem to be various semiconductor shortages, but it is most extreme in the automotive industry (and in laptops). When lockdown began, a lot of automotive manufacturers (OEMs in the jargon) canceled orders for electronic control units (ECUs). Generally speaking, OEMs don't order semiconductors directly themselves. In fact, they don't deal with electronics much themselves, they are system integrators, purchasing the electronic units from so-called tier-1s such as Bosch or Denso. When orders to the tier-1s were canceled, the knock-on effect was to cause semiconductor orders to be canceled.

The impact of lockdown on the automotive market turned out to be less severe than feared and so the OEMs issued new orders to the tier-1s, and the tier-1s attempted to issue new orders to the semiconductor companies, but there were two problems. The first is that semiconductors have a long lead-time for manufacture, especially for automotive with its additional reliability and test requirements. The second problem was that lockdown had increased demand for all sorts of electronics so that kids could do school over zoom, play video games, and so on. In the last year, I purchased a new (personal) Mac and a new iPhone, and I suspect I'm typical.

Suddenly, automotive CEOs who barely knew the word "semiconductor" were concerned with pretty much nothing else.

Most automotive chips are not in the most advanced processes, so I don't think that they are competing with GPUs and AI chips for advanced node wafers. So this chart from IC Insights may not be that relevant, especially in the top few positions, but it shows just how much semiconductor demand has increased in the last year. AMD is up 65%; Mediatek is up 60%. The fastest-growing foundry, to my surprise, is SMIC, up nearly 40% (all trailing edge process nodes). Renesas, the leader in microcontrollers and especially for automotive, is up 34% and one of their fabs had a major fire during the period and so presumably would have been higher still. As IC Insights says in the report though:

What is utterly amazing, however, is that during a year when global semiconductor sales are forecast to rise 23%, semiconductor revenue at Intel—the world’s second-largest semiconductor supplier—is forecast to decline 1%. Sony, the world’s 18th largest semiconductor supplier, expects to post a revenue decline of 3%!

One problem for Intel in 2021 has been the ongoing strain on IC supplies, which has limited laptop computer sales. Intel says its partners have been unable to source enough components to build as many laptops as they’d like, which has reduced orders for Intel CPUs.

That would seem to confirm that the issues are mostly not in the most leading-edge process nodes, where companies lock up supplies with foundries (or, for Intel and Samsung, with their capacity planners) for quarters if not years ahead.

Given that it takes 2-3 years to build a fab from scratch, all this growth has had to come from the existing fabs and fabs that were already under construction. Of course, it is possible to add more equipment to many fabs if there is space. SEMI just reported that global equipment billings jumped 38% year on year, and I'd be willing to bet the equipment manufacturers could have shipped more if they could have built it.

The effect of this on automotive is that most automotive companies were either unable to ship cars at all (put them on the lot waiting for electronic parts) or have had to ship new cars without options. Often without options that seem to have very little to do with electronics like heated seats. But that button on the dashboard to turn the seat heater on almost certainly does it over CANbus.

I happened to see a video discussing some specifics. These were just the ones that were mentioned, I don't think that these companies are in an especially bad position compared to others that could have been mentioned.

GM is shipping most vehicles with no heated or ventilated seats, heated steering wheels, wireless phone charging nor HD radio. Here in California, heated seats are really only necessary if you go skiing, but in Minnesota or Chicago that is different.
Porsche has no electrically adjustable seats (that CANbus again, I'm sure) and no electric steering column adjustments.
BMW shipping many vehicles with non-functioning touchscreens (the screen works to look at but the touch-screen functionality doesn't work and you have to use that little knob thingy that I think is called iDrive).
Even Tesla is not immune and has no rear-seat USB (yeah, first-world problem).

Since people couldn't buy new cars, they bought used cars, and the price of used cars has gone up by 50% or more in many cases. Plus shipping vehicles without things people want, like heated seats and touchscreens, makes a used vehicle "better" than new in some ways. This chart is from UK, but I've seen similar ones for other countries.

At the recent Tesla battery conference, which I'll write more about later in the month, Elon Musk showed this graph showing industry delivery of vehicles (by units not dollars). Tesla is the only company that increased its sales over the last 4 quarters (by a lot) and every other manufacturer declined. I suspect that one reason for this is that the senior management of Tesla does know the word "semiconductor", since it designs some of its own, and I am sure that it has orders going out several quarters for delivery of chips such as its self-driving chips and cameras.

The Latest

I don't have any special insight into details of inventories for automotive manufacturers, but a couple of recent reports are:

So maybe things are finally getting into a balance between semiconductor supply and automotive demand going forward.

Another change going forward is that some OEMs are talking about designing and procuring their own chips, as I reported last week in my post November Update: Automotive, Graviton 3, Images, New Fab, and More. And the tier-1s are moving too, as I reported in my post How Many New Fabs Are Under Construction? Ask Christian Dieseldorff:

Also nearby, automotive tier-1 Bosch, who has never built a fab before as far as I know, is building a $1B fab.

Of course, a $1B fab is not leading edge. That would cost more like $15-20B, but it is some amount of dedicated capacity.

Learn More

The IC Insights report (the summary, you'll need to pay to get the whole thing).

SEMI's report of the equipment market growth (again a summary, pay to get the whole thing).

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