Monday, December 13, 2021
Misjudgment by the car manufacturer
How the microchip supply chain fell into chaos
169 different industries are now complaining about a shortage of microchips. At the beginning of the problem there was a misjudgment by carmakers around the world. A well-known glutamate manufacturer has the power to decide whether or not game consoles can be delivered in time for the presents.
The lack of microprocessors not only hit the automotive industry badly this year. Consulting firm Goldman Sachs identified 169 industries that suffered from constant chip shortages this year. These include manufacturers of smartphones, computers, WiFi routers and medical devices. And experts do not yet expect a real turnaround in 2022. A number of problems that have contributed significantly to the global chip crisis still exist.
In order to better assess the future situation, it is worth taking a look back: At the beginning of 2020 the world was still looking rosy. The semiconductor industry had just come out of a protracted downturn and was on the verge of a strong economic upswing. But then Covid-19 emerged and the automotive industry in particular feared weaker demand. In fact, vehicle sales collapsed briefly in the spring of 2020. Almost in panic, the chief buyers of the automobile companies canceled their orders to large chip manufacturers such as TSMC in Taiwan. However, that turned out to be a serious miscalculation. “Suddenly the demand for cars rose sharply again,” says Kota Yuzawa, automotive analyst at Goldman Sachs.
The canceled production capacities in the chip industry were no longer available to the car companies. They had long since been passed on to the manufacturers of consumer electronics. “During this time we worked from home, did sports from home, went to school from home and entertained each other at home,” says industry expert Julia Hess from the Berlin Foundation for New Responsibility. This has led to increased demand for smartphones, tablets, laptops and game consoles. The global chip stocks were quickly used up.
Corona, onset of winter, major fire …
ntv is broadcasting the series “Supply Chains – The Global Stress Test” this week. The first episode will air today at 10:10 p.m. From medicines in Europe to Christmas lights in America – the documentation reveals how closely global retail chains are linked.
The situation was exacerbated by a chain of unfortunate events that perhaps only climate activists had foreseen. In February 2021, chip manufacturers such as Samsung, NXP and Infineon had to stop operations in Austin, Texas. After heavy snowstorms, the power supply failed and the semiconductor factories, the so-called fabs, could no longer be shut down in a controlled manner. This not only damaged the production facilities, but also components of the works’ infrastructure. There were also failures in Japan – here due to natural disasters and fires in chip factories. In March 2021, for example, a production plant of the chip manufacturer Renesas Electronics was damaged in a major fire, which exacerbated the shortage of microcontrollers.
As if that weren’t enough, big politics also contributed to the global chip shortage. The then US President Donald Trump had resolved to limit the global influence of Chinese high-tech companies such as Huawei and, among other things, imposed sanctions in the area of chip technology. As a result, Chinese companies bought chips and manufacturing equipment on a large scale.
A simple solution is not in sight, especially since there are different bottlenecks in the various industries concerned. The automotive industry lacks the chips because the production of semiconductors in the fabs cannot meet demand and is thus proving to be a bottleneck. In the case of game consoles such as the Playstation 5 from Sony, which were hardly available during the Christmas season, the shortage was not caused by bottlenecks in the fabs. In particular, there was a lack of a special insulating film, which is required for the production of carrier plates for the chips that have already been manufactured. However, there is only one manufacturer in the world for the basic material of the so-called ABF film, the Japanese company Ajinomoto, which is known to a wider audience as a producer of the flavor enhancer glutamate. Ajinomoto had hardly earned anything at ABF so far and therefore had little interest in expanding this area.
Europe left behind when it comes to chip production
“This is very frustrating for the chip manufacturer. The silicon wafer is exposed and actually finished. And then there is a lack of a comparatively cheap material with ABF to complete the last production step,” says Jan-Peter Kleinhans, who works with Julia Hess has published a study on the causes of the chip crisis for the New Responsibility Foundation. “This problem will not be solved by more fabs either.” In response to pressure from customers, Ajinomoto is now expanding its ABF production. And the large chip manufacturers such as Intel and Infineon are also increasing their production capacities so that the shortage will be alleviated next year and completely overcome in 2023.
But even with billions in investments, you can’t turn the clock. “The expansion of our existing fabs in Ireland will take between 18 and 24 months,” says Intel’s Germany boss Christin Eisenschmid. When building a new system, you have to reckon with four years. “A factory like this is highly complex and requires a huge investment to get the latest equipment.”
But not only those involved in the production of semiconductors do their homework, but also the customers – for example in the automotive industry: In the Europe-wide partner network Catena-X, for example, the most important players – from BMW and Bosch to Mercedes-Benz to Volkswagen – want to make their supply chains more transparent. This should also enable chip manufacturers to better calculate whether there is only a short-term fire in the pan or whether expansion in certain segments is worthwhile in the long term.
In dealing with the chip crisis, all those involved also expect the state to play an active role. “We are ready to make an investment of several billion euros,” says Intel manager Eisenschmid. “But we can’t do it alone.” In other regions of the world, chip production is massively subsidized. “That is also the reason why manufacturing has moved from Europe to Asia and.” Around 9 percent of global semiconductor production currently came from Europe. “That was 44 percent in the 1990s.”