All of these devices include plenty of chips – not just the central processor which can cost tens or hundreds of pounds, but also less expensive, smaller chips for controlling the display, managing power, or operating a 5G modem. Apple, for example, reported last year that it didn’t have enough supply of its new iPhones to meet global demand, with the supply of semiconductors already being very tight.
Car makers aren’t competing directly with high-tech companies for the same chip supply, as vehicle chips are usually based on older chip manufacturing technologies and don’t need the bleeding edge, but the shortage isn’t just in the fastest chips, it’s in everything.
Modern cars now include many tiny chips, most of which perform functions such as power management. Cars also use a lot of microcontrollers, which can control traditional automotive tasks like power steering, or are the ‘brain’ at the heart of an infotainment system. Car makers usually use just-in-time production techniques too, which means they can avoid having extra parts in costly storage. This can lead to problems, even if a five pence chip is missing, meaning manufacturers can’t supply a £50,000 car. If the chip that powers the in-car dials or automatic braking are delayed, for example, then so is the rest of the vehicle.
The automotive sector is only now realising that it’s seen as a lower priority than the electronics companies within the semiconductor supplier communities. In 2020, only three per cent of chip supplier TSMC’s sales were from automotive chips, compared to 48 per cent for smartphones as the real volume players.
The tech companies have higher margins, never cut down their orders and have long-term contracts with the suppliers, meaning that now that automotive demand is peaking faster than the OEMs had expected, car makers are struggling to be let back into the supply queue.
Car manufacturers also generally use automotive-grade chips, which are painstakingly ‘qualified’ against binders of industry standards to make sure they are suitably durable and reliable, making it more difficult for the motor industry to alternatively transition its production lines and supply chains elsewhere.