The crisis in the semiconductor sector threw a wrench into the automotive industry’s plans for production and sales. How could this happen? And how can supplies be secured in the future?
For decades the automotive industry was known for the stability of its supply processes. Every vehicle has thousands of components, which are made by hundreds of suppliers around the world—and each one of these components was right there on the assembly line when it was needed.
In 2021, however, these otherwise so robust supply chains suddenly began to crack. The problematic components were precisely those expected to play a key role in both the cars’ inner workings and the makers’ brand identities—namely, semiconductors. They continue to be in short supply, which means that many cars cannot be produced on time or at all. According to the German Automotive Industry Association (VDA), around 700,000 fewer vehicles will be produced in 2022 by German carmakers alone. That is a decrease of around 13 percent from the year before. A significant improvement in semiconductor supplies seems unlikely to set in before the second half of 2023.
Multiple trips around the world
The shortage is due to a number of factors. Covid-related factory closures in Asia have played a role, as has the fire at a major Japanese fabrication plant in spring 2021. In addition, the extraordinary complexity of microchip production makes it correspondingly vulnerable. Dr. Hagen Radowski, Senior Partner at Porsche Consulting, has more than two decades of experience in the IT industry. “Semiconductor production is one of the most sophisticated value-creation processes ever invented,” he says, “with more than 130 individual steps from the initial grains of sand to the finished chips.” In the course of production, the nascent semiconductors travel multiple times around the world. Moreover, the individual production steps themselves are very complicated. For the latest chip generation with a packing density of 5–9 nanometers, the production processes take place on a nearly atomic scale with the associated complexity.
What strategies and measures are the carmakers using to relieve the current shortage promptly and then to ensure it will not happen again? First of all, they are trying to understand the requisite processes better and to gain greater control over the supply chains. That has proved very difficult thus far, because most of a vehicle’s semiconductors are found in components from a multitude of different suppliers. As Radowski explains, “Carmakers are seeking more direct contact with their ‘suppliers’ suppliers’ in chip production—and at the highest levels. Chip procurement is now a board-level matter and the top priority on the agenda just about everywhere.”
Porsche Newsroom
For decades the automotive industry was known for the stability of its supply processes. Every vehicle has thousands of components, which are made by hundreds of suppliers around the world—and each one of these components was right there on the assembly line when it was needed.
In 2021, however, these otherwise so robust supply chains suddenly began to crack. The problematic components were precisely those expected to play a key role in both the cars’ inner workings and the makers’ brand identities—namely, semiconductors. They continue to be in short supply, which means that many cars cannot be produced on time or at all. According to the German Automotive Industry Association (VDA), around 700,000 fewer vehicles will be produced in 2022 by German carmakers alone. That is a decrease of around 13 percent from the year before. A significant improvement in semiconductor supplies seems unlikely to set in before the second half of 2023.
Multiple trips around the world
The shortage is due to a number of factors. Covid-related factory closures in Asia have played a role, as has the fire at a major Japanese fabrication plant in spring 2021. In addition, the extraordinary complexity of microchip production makes it correspondingly vulnerable. Dr. Hagen Radowski, Senior Partner at Porsche Consulting, has more than two decades of experience in the IT industry. “Semiconductor production is one of the most sophisticated value-creation processes ever invented,” he says, “with more than 130 individual steps from the initial grains of sand to the finished chips.” In the course of production, the nascent semiconductors travel multiple times around the world. Moreover, the individual production steps themselves are very complicated. For the latest chip generation with a packing density of 5–9 nanometers, the production processes take place on a nearly atomic scale with the associated complexity.
What strategies and measures are the carmakers using to relieve the current shortage promptly and then to ensure it will not happen again? First of all, they are trying to understand the requisite processes better and to gain greater control over the supply chains. That has proved very difficult thus far, because most of a vehicle’s semiconductors are found in components from a multitude of different suppliers. As Radowski explains, “Carmakers are seeking more direct contact with their ‘suppliers’ suppliers’ in chip production—and at the highest levels. Chip procurement is now a board-level matter and the top priority on the agenda just about everywhere.”
Porsche Newsroom
