Thu, May 6, 2021

Chipwreck: Visualizing the downsides of semiconductors

EconoGraphics by Niels Graham, Josh Lipsky

China Japan Trade United States and Canada

Since the 1970s, cars have become increasingly reliant on semiconductors. With the introduction of electronic fuel injection in the 1980s, airbags in the 2000s, and the advanced driver assistance features available today, semiconductor-reliant components make up more than 40% of the costs of manufacturing a modern car.

Check out the chart below to see why our computerized cars have created a major vulnerability: 

With a faster-than-expected global rebound, in conjunction with the production disruptions caused by the severe weather Texas experienced in February and a fire at Japan’s Renesas Semiconductor Manufacturing Co. in March, the world’s semiconductor manufacturers are scrambling to keep up. 

The problem is worse than many have realized. The top of our chart shows projected estimated Q1 vehicle loss from earlier this year. But the bottom shows what Ford actually announced late last week. 

There’s a discrepancy between the projections and the reality. In Q1, Ford made 215,000 fewer cars than it should have. That’s more than double the expected loss (without even counting in other North American manufacturers like GM, Chrysler, and Toyota whose data we don’t have yet).  

These outdated numbers are still being used in media reports. Furthermore, it is likely to get worse before it gets better. As our graph below shows, the average time between when a semiconductor order is placed and when it will be fulfilled has surged.

Car chips supply chains are long and complex so many manufacturers will have to wait until 2021 Q3 for supplemental production to come online. For now, other manufacturers will have to follow Ford’s lead and cut production, or implement more creative solutions such as removing high-end features like navigation systems and oversized digital screen from their vehicles.

All of this may contribute to longer wait times, higher prices, and transitory inflation pressures. The world will have to wait until Q3 to see if the automakers can catch-up as promised.

Mon, Mar 29, 2021

Supply chains and semiconductors: The need for US diplomacy

Any effort to revitalize the US’s to domestic semiconductor manufacturing capacity would be incomplete without diplomacy. US allies such as Taiwan and South Korea remain global leaders in semiconductor manufacturing. If the U.S. wants to rejoin them, the Biden administration should deepen investment ties with Taiwan and South Korea and find ways to bring them closer to the Quadrilateral Security Dialogue.

Blog Post by Jeremy Mark

China Defense Technologies

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