We are told there is a new car shortage because they don’t have the chips needed to make cars. So how are they still making cars?


Are there just slowly using the rest of the chips they have? Are they making chips but very slowly? Using other kinds of chips?

In: 35

They’re making some slowly. Making less vehicles than normal, offering less options and booking builds up to 18 months in advance. At least in the heavy duty (semi) world. Replacement parts for electrical parts are sometimes unavailable and sometimes booking 4-6 months for a ship date. Used is an option that many guys are looking at. With sensors that doesn’t work but electric mirrors and heater parts.

There’s not enough. The biggest problem is that ICs have very long lead times. Anywhere between 3-6 months. So if you cancel one set of orders like car makers did at the start of 2020 they’re automatically 3-6 months behind on the number of chips coming in. Since demand didn’t drop with the onset of the pandemic this meant cancelling orders in Q1 2020 was a massive mistake. By the time the car manufacturers realized they still needed the chips the wafer starts had already been reallocated to other chip lines or resold since EVERYONE has been wanting chips.

To get back in front of the demand they can try to outbid other people for coming wafer starts or buy them off other companies but in general that will make the fabrication uneconomical compared to how much the cars sell for. Keep in mind the car companies sell to dealers at an invoice price along with holdback and incentives and any excess profit from demand is typically money the manufacturer won’t see. So car manufacturers don’t want to pay more for parts than necessary. The end result is that every auto maker except Toyota (who lasted a year and a half longer than everyone else thanks to stockpiling critical ICs) ended up having to stop production since they couldn’t roll complete cars off the line.

However demand still didn’t stop. Orders kept coming in from dealerships so they’ve basically had to take what they can get, put them in cars, and get them out the door. In the case of some makers (Tesla) they’ve been stripping back redundant systems which can be retrofitted later to activate certain functionality (self-driving).

It also didn’t help with last February when Texas froze over. Both Samsung and NXP had to throw out weeks of wafers when the power was halted to the semiconductor plants which further limited the number of chips coming out for cars.

So yeah, the only solution is to construct more fabs but that’s bottlenecked too. The people who make the machines that fabricate leading edge processes, ASML, are basically building them as fast as they can but it’s still not fast enough.

There’s a chip shortage, not a complete lack of any chips. Car makers are only able to get a fraction of what they need so they can only build a fraction of the cars they normally would.

The plant I work in is having other troubles on top of the chips. Lots of parts are behind right now. Lack of chips isn’t even that big of a deal right now. There are a lot of supply chain issues.

Warehouses are struggling for staff, as the price of living is shooting up and workers are seeking decent wages. Trucking is struggling, too. But not nearly as much.

Things are slowly starting to recover. Covid caused production to cut down heavily for a while, but the demand for vehicles is still high. The company made some major changes when covid started, expecting to lay low for a while and lost a lot of structure.

Now, trying to crank everything back up to 11 but not having the means to do so is putting a strain on the system.

Pre-covid, our plant was doing about 2,400+ vehicles a day. We stopped production and took a lot of time off. When things started back up, the chip shortage hit, and we saw days when barely even 200 vehicles made it off the line.

In the weeks leading up to current, we were able to get about 500 to 800 a day. The start of the week runs okayish as parts get somewhat stocked up over the weekends. There’s a lot more downtime as the week goes on. The supply chain can’t move as fast as we can.

We’re hovering around 1,000 a day now, and things tend to get a little better each week.

It’s still going to be a long time before a full recovery is made. We dropped from 24 hours a day to 16 when covid hit. Bringing that extra shift back is going to be a huge job that’s not going to happen until the supply issues are solved.

They’re still going to schedule production. Parts or no parts. They’re still getting money somewhere. With the contracts they have with suppliers and warehousing, there’s a fine for not making delivery on time and stopping production.

A shortage means they are getting fewer chips than they want, not none at all. So the manufacturers are doing a number of things, producing fewer vehicles, partially building some until they get enough chips to finish them, or reducing features to use less chips per car.