Chip Shortage

I sometimes forget about The View Through The Windshield, but when I remember to check in, I find some good stuff, like this:

The Truth About Microchips: It's a well-known fact that automakers treat suppliers like crap. They are very demanding, slow-pay and prone to cancel contracts when business slumps.

The semiconductor market is big and broad and many chipmakers have decided they don't need the hassle of dealing with car companies. "The car sector has been used to the fact that the whole supply chain is centered around cars," said McKinsey partner Ondrej Burkacky. "What has been overlooked is that semiconductor makers actually do have an alternative."

Smartphones, video games and other consumer electronics applications require more sophisticated chips than automotive semiconductor applications and that means higher prices and more profit for chipmakers. "The auto industry spends around $40 billion a year on chips - about a tenth of the global market. By comparison, Apple spends more on chips just to make its iPhones, Mirabaud tech analyst Neil Campling reckons."

In summary, the semiconductor crunch that has battered the auto sector in recent times leaves carmakers with stark choices: pay up (higher prices, faster payment of invoices), stock up (increase finished chip inventory at the automaker's facility) or risk getting stuck on the sidelines as chipmakers focus on more lucrative (higher-margin) business elsewhere. (posted 3/1/21) - The View Through The Windshield