Global chip shortage crisis changes auto industry: learn to share costs and risks with chipmakers

A shortage of chips has forced automakers around the world to abandon production plans for millions of vehicles over the past two years. The situation is easing, but auto companies are paying a new and permanent price.

Executives from both industries say that how to solve the chip shortage has now become a mandatory point of thought in automotive development. This shifts the risk and some of the cost from the chip companies to the automakers.

General Motors, Volkswagen and Ford and other auto giants newly formed teams are negotiating directly with chip companies; Nissan and some other car companies are being forced to accept longer order cycles and higher inventories; major suppliers to the auto industry, including Bosch and Denso, are also beginning to invest in chip production; General Motors and Stellantis also said they will work with chip designers to design parts.

Industry executives and analysts believe that, in general, these changes represent a fundamental shift in the automotive industry: higher costs, more involvement in chip development efforts, and more capital invested in exchange for a more stable supply of chips. For automotive companies that previously relied on suppliers, and suppliers of suppliers to ensure chip supply, this is a 180-degree turn.

For chipmakers, the still-developing partnership with automotive companies is welcome, and the relationship is long overdue for reinvention. Many chip company executives pointed out that a large part of the recent supply chain crisis was due to a lack of understanding by automakers of how the chip industry's supply chain works and an unwillingness to share costs and risks.

At present, the automotive industry seems to have passed the most severe period of the crisis. It is estimated that since the beginning of 2021, the crisis has led to a reduction of 13 million units of global car production.