The chip shortage is back for Year 2

Last week in China, the industry ministry warned companies there to expect tight supplies of semiconductors over a relatively long period.

According to a Reuters report, Luo Junjie, an official with the Ministry of Industry and Information Technology, used a press conference to encourage key businesses to increase investment and promote better supply capacity of the entire chip industry chain.

Separately, in an interview reported last week by Bloomberg, Intel CEO Pat Gelsinger urged the U.S. and Europe to push ahead with efforts to foster chip manufacturing, arguing that government funding is needed to address an over-concentration of production in Asia.

“Let’s not waste this crisis,” he said. “It’s good economics, but it’s also national security.”

Intel said Friday, Jan. 21, that it plans to spend $20 billion on a massive chipmaking hub on the outskirts of Columbus, Ohio, and Gelsinger indicated that some production would go to the auto industry.

The U.S. chipmaker is also planning to build a production base in Germany and other facilities in Italy and France.

But the question around the industry: When will adequate supplies of chips reach automakers?

“It’s a complex situation,” said Matteo Fini, IHS Markit vice president for automotive supply chain, technology and aftermarket. “The situation has eased somewhat, but it will continue through the midyear. At that time, we expect to see some new chip capacity come online, although it will not be a great deal.

“But then,” he added, “a new situation will arise: The industry will begin to have a worse issue with what are known as analog chips. That will be a new layer of issues to deal with.”

Analog chips are very widely used and perform relatively basic functions in automobiles, such as computing vehicle signals.

The chip industry has been evolving toward more sophisticated versions, and automakers are adopting those. But vehicles still rely on large numbers of analog chips.

The industry has not yet dealt with the fact that much of the eagerly desired new chip capacity being built is intended to produce those more sophisticated chips — not the simpler analog ones.

LMC Automotive forecasts that the ongoing microchip crunch will dent global vehicle output by 4 million more vehicles in 2022. Worldwide output should increase about 12 percent from 2021 to 85.8 million vehicles — thanks mostly to gains in the second half. But overall volume will still languish below 2018 and 2019 levels.

“The first half of the year will still be in the throes of disruption,” said Justin Cox, LMC’s director for global production. “The growth will be in the back half of the year.”

https://www.autonews.com/manufacturing/chip-shortage-back-year-2