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Auto industry: How the automaker escaped the chip crisis

2021-01-26T11:58:30.717Z


First there was a lack of battery cells for the electric offensive, then the corona pandemic tore up the fragile supply chains. Now the automakers are also running out of chips. How the corporations come out of the scarcity crisis.


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Up to 5000 semiconductor chips per vehicle are already in use in upper-class models, and the trend is rising

Photo: Mercedes-Benz AG - Global Communications Mercedes-Benz Cars & Vans / Daimler

The pandemic relentlessly exposes the weaknesses of the German automotive industry.

The industry is caught in a network of difficult dependencies, from which it can hardly free itself.

The problem was already indicated in the pre-Corona period: At that time it was the lack of production capacities for battery cells in Europe that gave rise to discussion.

When the global virus crisis erupted, it became clear how fragile international supply chains were.

Now, with the global scarcity of semiconductors, there is another supply problem that could endanger the production of German car manufacturers (and not only the German automaker) for a long time to come.

Stefan Randak

Stefan Randak is director and head of the automotive practice group at the interim management provider Atreus in Munich.

Basically, semiconductors are nothing more than "light switches" with the task of conducting electricity - or not conducting it.

But what they do is to make this possible up to a billion times a second.

That is what makes them so interesting for modern automotive technology.

Up to 5000 semiconductor chips per vehicle are already in use in upper-class models, and the trend is rising.

They control the infotainment, the assistance systems, the battery management, the chassis and the engine.

The causes of the shortage are complex

Without the chips, the German car factories are in a fix, the first have already scaled back their production, entire shifts are canceled: Daimler is cutting back its production in Bremen and Rastatt.

Audi in Neckarsulm and Ingolstadt.

Volkswagen in Emden.

But large suppliers such as Continental are also feeling the effects of the shortage.

Experts believe it could take nine to twelve months for the situation to return to normal.

In addition to the switch to electromobility and the consequences of the corona pandemic, the industry therefore has another major construction site to deal with.

But how did it come to that?

The causes are complex:

  • Fatal misjudgment

    : the international manufacturers of semiconductor products scaled back their production after the outbreak of the pandemic, similar to the car manufacturers.

    They did not expect such a rapid and significant increase in automobile production - and neglected to adjust capacities again.

  • Increased competition

    : The chips are not only installed in cars, but also in entertainment electronics and medical technology devices.

    They are increasingly bought in times of pandemic - the demand for semiconductors is correspondingly greater.

  • Increasing technical equipment

    : The trend towards more infotainment and assistance systems is no longer limited to the luxury class of automobiles.

    The demand - and with it the consumption of semiconductor products - is growing across all vehicle types.

    Some manufacturers underestimated this development and calculated the demand too low.

  • Growing pressure to innovate

    : The future of the industry depends more than ever on innovation - and around 80 percent of this in the vehicle industry depends directly or indirectly on semiconductor development.

  • Self-driving cars

    : Autonomous driving functions, especially radar-based systems, can only be realized if extremely powerful processors and chips are on board.

  • Rising prices

    : The current shortage has caused the company values ​​of chip manufacturers and prices for semiconductor products to rise sharply.

    The

    Trendlink Index Semiconductor Auto Industry

    has climbed from below 200 points to 350 points since April 2020.

    This is of course welcomed by semiconductor manufacturers - and could dampen the eagerness to increase capacity as quickly as possible.

  • There is no quick remedy in sight

    The total turnover of chip manufacturers with the automotive industry was around 34.5 billion US dollars in 2017 - and is growing steadily.

    According to analysts, global sales of chips to support artificial intelligence for alternative drive trains, infotainment, ADAS driver assistance systems, driving safety and other automotive applications will be around 68 billion dollars by 2022.

    That would almost double within five years.

    A current statement by the industry association VDA shows how concerned the car companies are: "We are working intensively around the world to ensure the supply of semiconductors - especially at the chip manufacturer level. The VDA is also in contact with the federal government on this."

    How the federal government should contribute to solving the problem is not immediately apparent.

    One thing is clear: there is no immediate remedy in sight.

    Because even if the large semiconductor manufacturers are willing to expand their production capacities, this will only bear fruit in the coming year.

    This renewed scarcity situation makes it clear - once again - how massive the German automotive industry's dependence on foreign suppliers is.

    Among the five largest chip manufacturers for the automotive sector, which together cover around 50 percent of the market, there was only one German company in 2019: Infineon.

    The market is also highly volatile: The analysts of IC Insights recorded more than 30 acquisitions in the semiconductor industry worth a total of around 32 billion US dollars in 2019.

    Takeover candidates can be found primarily in high-growth sectors such as machine learning, artificial intelligence (AI), autonomous driving, person recognition, computer vision, virtual / augmented reality and in the area of ​​networking via high-speed radio links.

    In addition, there is a considerable dependency on the largest silicon manufacturer: China.

    Russia, the USA and Europe follow only a long way behind.

    Ways out of the crisis

    In the short term, the vehicle manufacturers have no choice but to work in discussions with the German and European semiconductor suppliers to use the currently available production capacities in such a way that as few lines as possible in the automotive industry stand still.

    In the long term, given the sustained growth, it would be worthwhile and goal-oriented to expand production capacities in Europe and thus minimize dependence on Asian and American suppliers.

    In principle, this is a task for German and European companies.

    However, if they show too little initiative, activities on the part of the state would be appropriate, such as the initiatives to set up a European battery cell production facility.

    In addition, it is the task of the state supervisory authorities to closely monitor the volatile market for semiconductor manufacturers - especially when it comes to taking over German and European companies.

    This crisis is about much more than a temporary scarcity.

    Not only the raw materials, but also the products and components required for further processing in the technology sector could in future become the plaything of political interests.

    If the German automotive industry wants to circumvent such politically determined impassability, it must reduce the structural dependencies and build up a greater degree of independence.

    Analyzing this and implementing it sustainably is a core task for every car manager.

    But it will be difficult without active political support.

    Stefan Randak is a member of the

    opinion

    makers of manager-magazin.de.

    Nevertheless, this column does not necessarily reflect the opinion of the editorial team of manager magazin.

    Source: spiegel

    All news articles on 2021-01-26

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