With the global chip shortage not showing signs of going anywhere, an unlikely player is stepping in. It is American-based Ford.
The scarcity of chips has affected electronic equipment makers, from phone makers to laptop makers to gaming console makers. However, the shortage impacts every manufacturer that uses chips, including vehicle makers. Recent models now have lots of smarts that require the vehicle has its own brainbox.
After a year and with no end in sight for the lack of chips, Ford has partnered with chip producer GlobalFoundries Inc. The agreement between the two companies will “advance semiconductor manufacturing and technology development within the United States.”
The pair has not yet committed to constructing any manufacturing facilities, but they will “explore expanded semiconductor manufacturing opportunities to support the automotive industry.”
Explaining why his company is going into chip development, Chuck Gray, Ford’s VP for embedded software and controls, said, “[we] feel like we can really boost our product performance and our tech independence at the same time.”
GlobalFoundries has lots of experience making chips ever since it was spun off global powerhouse AMD in 2009. It has grown to become the fourth biggest semiconductor producer, after TSMC, Samsung, and UMC. Its clients include its parent company AMD, Qualcomm, and its competitor, Samsung. GlobalFoundries’ production has been booked till 2023. It went public recently.
There have been pointers that Ford will eventually venture into chip-making since its CEO, Jim Farley, spoke to The Verge in May 2021, after unveiling the F-150 Lightning electric pickup truck. Here is an excerpt from the interview, courtesy of The Verge:
“There’s a big push from a number of chip makers and foundries to do the manufacturing in the United States, to get various incentives from the administration to support that investment. All of that still looks like 10 years out. How do you solve the chip shortage today? Do you just wait it out, or are there steps you can take?
“Well, there’s certainly things we can do. For single-source content, like the Renesas Naka facility that had a fire, those single-sourced chips, we can run some buffer stocks. Which is not ideal. It’s kind of a waste, but it’s better than running out of what we have.
“The other thing we can do is to give the foundries more confidence in future production by going direct with them. So on behalf of our supply base, actually going and contracting purchases. I think boots on the ground in places like Taiwan and China and Asia are going to be more important for us.
“I think there’s certainly things we can do to make it better. We are starting to see some confidence in the second half of this year, but when I talk to my colleagues at Cisco, and Dell, and other companies, they run the supply chain totally different than automotive. And it’s about time for us to catch up.”
The demand for chips by automobile makers has increased. The industry has been able to get by largely because it can use older technologies and did not need them in large volumes like phone manufacturers as Apple and Samsung do. However, the pandemic slowing down businesses worldwide, combined with an unfortunate fire accident at a chip-making plant, has caused supply issues.
Companies like Tesla and Rivian need more chips to differentiate their offerings by loading them up with tech. The former company was able to absorb the impact of the shortage by rewriting their software to work on other chips, a feat alluded to by Volkswagen’s CEO. However, Tesla has not been able to escape the effect of the shortage completely. Some of its cars have been delivered with ports missing, to the annoyance of buyers that waited long before their orders were fulfilled.
Ford has more than enough motivation to make chips, as its popular F-150 series pickup truck was hit hard, forcing the company to cut production by half. Some Ford plants even closed down temporarily as there was no chip to work with.
Other automakers have tried to deal with the shortage by removing some features like Tesla. GM eliminated heated seats in its Chevy trucks, while BMW went as far as sacrificing touchscreens in some models.