Title: How Covid led to a $60 billion global chip shortage for automakers
Headings: How Covid led to a $60 billion global chip shortage for the auto industry
How Covid led to a $60 billion global chip shortage for the auto industry
Key Points
‘Knife fight’
Scrambling for chips
How did we get here?
A close up image of a CPU socket and motherboard laying on the table.

Content: The global automotive industry is an extremely complex system of retailers, automakers and suppliers. The last group includes larger suppliers such as Robert Bosch or Continental AG that source chips for their products from smaller, more-focused chip manufacturers such as NXP Semiconductors or Renesas. A kink in the supply chain during any part of the process can have a tremendous ripple effect across production. “This is a classic example of the bullwhip effect,” said Razat Gaurav, CEO of supply chain software and analytics firm Llamasoft. “ Small changes in demand, as they propagate further upstream in the value chain, the variability and the volatility grows dramatically.” A close up image of a CPU socket and motherboard laying on the table. Narumon Bowonkitwanchai | Moment | Getty Images
Much of the problem begins at the bottom of the supply chain involving “wafers.” The wafers are used with the small semiconductor to create a chip that’s then put into modules for things like steering, brakes and infotainment systems. A 26-week lead time is needed to build the chips before they are installed in a vehicle, according to Hau Thai-Tang, Ford’s chief product platform and operations officer. The origin of the shortage dates to early last year when Covid caused rolling shutdowns of vehicle assembly plants.