Technology

Canadian auto plants sputter as industry chips away at semiconductor shortage

Prior to the restart, the automaker declined to tell sibling publication Automotive News about its sourcing strategy or whether it had paid a premium to access more chips.

Jeff Schuster, president of global vehicle forecasting at LMC Automotive, told Automotive News that GM was “doing a lot of scenario planning early on” during the crisis while other automakers were waiting for the situation to play out.

“Did that lead to a better position and the ability to find a [chip] source?” he said. “I can’t say for sure, but it seems like all of these things played out in a coordinated way.”

Meanwhile, Stellantis on June 23 it would resume Chrysler minivan production July 5 after having run just a handful of shifts since March 29.

Still, Fiorani said the industry is far from out of the woods.

“We’d like to say that we’re seeing the worst of it now, but that’s likely not the case. We might not see the worst of it until possibly Q3, possibly Q4.”

GM Canada on June 25 said CAMI would be on schedule plant shutdown during the first two weeks of July, and down again the week of July 19 through the week of July 26, due to semi conductor shortage.

CHIPS FED TO CONSUMER GOODS

The shortage stems from last year’s two-month shutdown of global vehicle manufacturing because of the COVID-19 pandemic. As demand for chips from the auto industry plunged, chipmakers turned their attention to consumer electronics, providing microchips for computers, smartphones, televisions and video games.

Since then, auto sales have surpassed expectations from a year ago, leaving chipmakers scrambling to keep up with increased demand. About 10 per cent of all semiconductors produced worldwide go to the auto industry.

The problem for the industry is that plants that produce the types of microchips it needs more than any other are already at or near full capacity, said Bettina Weiss, chief of staff at California-based SEMI, which represents 2,400 electronics design and manufacturing companies. Most auto components use older microchip technology built at 200-millimetre fabrication facilities — or 200-mm fabs, as they are known in the supply chain. Those fabs produce chips using 200-mm wafers, while cutting-edge semiconductors are built at plants using 300-mm wafers.

Capacity at those 200-mm plants is already near 100 per cent, and adding new lines would take time — and could prove to be difficult to do. Much of the machinery and equipment needed for 200-mm production is now difficult to come by because the technology is older, Weiss said.

“The semiconductor guys are certainly trying to help mitigate this very difficult shortage right now. The challenge is that nothing is quick.”

The shortage, Weiss said, “is going to continue for quite a while, I’m afraid.”

The supply squeeze comes even as global-200-mm-fab capacity was on pace to reach record growth this year, Weiss said. Capacity is expected to rise as 22 new or expanded 200-mm plants come on line worldwide by 2024.

But while these projects will help microchip makers keep up with increased demand in the future, they’ll do little to address the current crisis, since many won’t be operational for years, Weiss said.

CHIPPING AWAY AT SOLUTIONS

So what can be done in the meantime?

David Adams, CEO of the Global Automakers of Canada, which represents the interests of import automakers, said the chip crisis could force the companies to rethink their supply chains, making them more regional and vertically integrated.

“That sort of flies in the face of the decentralized [just-in-time manufacturing] model, which works well when there are no external threats or disruptions, but that is not the world we live in today.”

Building new plants requires time and massive investments. Chip fabricator Taiwan Semiconductor Manufacturing Co. (TSMC) is investing in a new fab in Arizona that it says could build 20,000 300-mm wafers per month. But the project will require a US $3.5-billion ($4.2-billion) investment upfront, with plans to invest $12 billion ($14.5 billion) there through 2029.

AutoForecast Solutions’ Fiorani suggested that in the meantime, automakers and suppliers could purchase existing or mothballed plants to get microchips built for the auto industry.

“Chip manufacturers will either see the opportunity in making money off of those chips,” he said, “or the established automotive supplier community is going to build their own infrastructure for chips.

“Somebody’s going to see the writing on the wall and the money to be made and go after it.”

Automakers, suppliers, chipmakers and every player in the supply chain should engage in “transparent, honest and open dialogue” to better understand where their respective pain points are today so that they can be addressed in the future, Weiss said.

“How are some of these regional supply chains structured? What are the arrangements [automakers] have with their tiers? Maybe commitments [become] longer, which makes it easier to plan,” she said.  “There’s so much to be learned just by talking about this and seeing how they can align more and get more visibility into longer-range planning for an OEM.”

Alexa St. John and Hannah Lutz of Automotive News contributed to this story.

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