Three of the world’s largest automotive manufacturers—Ford, GM, and Hyundai—have recently announced plans to gain more control over the semiconductor supply chains through partnering and vertical integration. Of the three companies, Ford and GM have announced specific plans, with each taking different approaches. But all three—and likely other large automakers who are considering such sourcing strategies—share at least one common goal: to avoid the production cutbacks and lost revenues that have been caused by semiconductor shortages over the last year.
“The moves are the latest examples of how pandemic-related disruptions are prompting companies to exert greater control over their supply chains by moving production closer to home, or in some cases in-house,” reported The Wall Street Journal on Nov. 22. For automakers, who were hammered by semiconductor shortages, the shift in semiconductor sourcing strategy is part of unwinding “decisions made over decades to outsource key components to outside suppliers.”
GM announced that it is partnering with seven major firms in the semiconductor value chain: Qualcomm Technologies; STMicroelectronics; TSMC; Renesas Electronics; Onsemi; NXP Semiconductors; and Infineon Technologies. GM President Mark Reuss said the company will work with these partners to reduce the number of unique microcontroller units required in GM vehicles by 95%. “Under the strategy, hardware and software developers will draw from three families of chips,” designed and manufactured by GM and its partners, according to Automotive News.
GM expects semiconductor requirements in its vehicles to more than double over the next several years, driven by the company’s increasing production and sales of electric vehicles, autonomous vehicles and connected services for navigation, roadside assistance, in-vehicle apps, and other services.
Ford, on the other hand, aims to bring chip design and development in-house with the goals of both avoiding future shortages and improving vehicle features such as autonomous driving and battery energy management in electric cars. “We feel like we can really boost our product performance and our tech independence at the same time,” said Chuck Gray, Ford’s vice president of vehicle embedded software and controls.
Ford’s chips will be manufactured by Global Foundries, whose CEO Tom Caulfield called the deal “a key step forward in strengthening our cooperation and partnership with automakers.”
Ford’s announcement has evoked some skepticism about how quickly and successfully the company can build up its capacity to design integrated circuits in-house. “Building a serious chip-design operation will be far from a simple undertaking for Ford,” reported the Journal, noting that chip design is “a difficult discipline that typically takes companies years to master.” To build in-house design capabilities, Ford will have to compete for engineering talent with companies like Intel, Nvidia and “also deep-pocketed tech companies like Amazon Inc. and Apple Inc. that are increasingly designing chips in house.”
Subscriber comments on the Journal’s story included some interesting perspectives, with one commenter opining that Ford will be hampered in recruiting semiconductor engineers by its uncompetitive compensation structure and its reputation as “an old un-sexy company.” Another commenter agreed about Ford’s recruitment challenges but pointed out that chips needed in Ford vehicles “are not nearly as complex as the CPU chips Tesla designs.” He added that the automaker’s relatively simple design requirements for semiconductors make Global Foundries an appropriate partner because the firm “can’t manufacture chips anywhere near as complex as what TSMC and Samsung can do.”
Meanwhile, according to The Drive and Reuters, Hyundai’s plans have been announced in general terms only by COO Jose Munoz. “We want to be able to develop our own chips within the group, so we are a little bit less dependent in a potential situation like [the pandemic],” said Munoz. “This takes a lot of investment and time, but this is something we’re working on.”
Munoz indicated that chip development would likely be led by Hyundai Mobis, the company’s wholly owned parts supplier. “And while Munoz doesn’t explicitly state the automaker’s plans to mass-manufacture chips, the fact that much of this could be performed by its component [Hyundai Mobis] indicates that it’s likely,” reported The Drive.