There will be a new and ongoing cost to the automakers as a result of the easing of the computer chip shortages that led them to cancel production plans for millions of cars during the previous two years.
According to executives in both industries, what were previously “war room operations” to deal with chip shortages are now integrated components of car development. Due to this, automakers are now responsible for some of the expenses and hazards.
Direct negotiations with chipmakers are being conducted by newly formed teams at companies like General Motors Co., Volkswagen AG, and Ford Motor Co. Nissan Motor Co Ltd and other automakers are taking orders with longer lead times and larger inventory. Important suppliers like Denso and Robert Bosch are making investments in chip production. As stated by GM and Stellantis, component design will be done in collaboration with chip designers.
Together, the changes, which include higher expenses, more hands-on labour in chip creation, and a greater capital commitment in exchange for better visibility in their chip supplies, mark a fundamental shift for the auto industry, according to executives and analysts.
It represents a U-turn for automakers who traditionally sourced semiconductors from suppliers or suppliers of suppliers.
The ongoing collaboration between chip makers and automakers represents a much-needed and welcome reset. The latest problem is mostly attributed by many semiconductor executives on the automakers’ lack of knowledge of the chip supply chain and their reluctance to share cost and risk.

The pricey improvements are coming together just as the car industry seems to be getting beyond the worst of an even more expensive crisis that, according to one estimate, has reduced worldwide output of automobiles by 13 million units since the beginning of 2021.
Not a one call was received
The head of Taiwan Semiconductor Manufacturing Co., the largest chipmaker in the world, C.C. Wei, claimed that up until the point when the shortage was critical, he had never received a call from a senior executive in the auto sector.
“In the past two years they call me and behave like my best friend,” He recently informed an amused group of Taiwan Semiconductor Manufacturing Co (TSMC) partners and clients in Silicon Valley. According to Wei, who is used to taking orders for 25,000 wafers, one automaker called immediately requesting 25 wafers. “No wonder you cannot get the support.”
The chief executive of GlobalFoundries Inc., Thomas Caulfield, claimed that the car industry is aware that it cannot any longer entrust chipmakers with the risk of constructing multibillion-dollar chip facilities.
“You can’t have one element of the industry carry the water for the rest of the industry,” he told. “We will not put capacity on unless that customer is committed to it, and they have a state of ownership in that capacity.”
For the purpose of securing its chip supply, Ford has declared that it will cooperate with GlobalFoundries. More agreements of that nature with other automakers are in the works, according to Mike Hogan, who is in charge of GlobalFoundries’ automotive division.
Minnesota-based chipmaker SkyWater Technology Inc.’s chief executive, Thomas Sonderman, told Reuters that the company is in talks with automakers about putting “skin in the game” by investing in machinery or funding R&D.
Onsemi’s CEO, Hassane El-Khoury, claimed that by collaborating more closely with automakers and their suppliers, the company has secured long-term contracts worth $4 billion for silicon carbide power management chips, a novel material that is gaining popularity. “We’re making billions of dollars of investment every year in order to scale that operation,” he told. “We’re not going to build factories on hope.”
Michael Hurlston, the CEO of Synaptics Inc., said the recent, more direct collaboration with automakers might open up new revenue prospects and help manage risks. Synaptics Inc. makes the touch screen-driven semiconductors that had slowed down certain auto production.
Even though OLED screens have higher contrast and consume less power than LCD screens, Hurlston claimed that the automotive industry has warmed to utilising them. OLED screens are less durable than LCD screens, which many believed would restrict their adoption in automobiles.
“But that perception has changed pretty dramatically over the last two years. And that perception has changed as a direct result of us being able to talk to (the auto industry),” he said. “The paradigm has really, really shifted for us.”
One computer would be used to centrally control all activities, according to the chief executives of Renesas Electronics Corp. in Japan and NXP Semiconductors N.V. in the Netherlands, who both told Reuters they were co-locating engineers to assist automakers in designing a new architecture.
“They have woken up,” remarked Kurt Sievers, CEO of NXP. “They have understood what it takes. They try to find the right talent. It’s a big shift.”
‘We have understood’
According to Gartner, by 2026, the average semiconductor content per car would be more than $1,000, having doubled since the first year of the pandemic. For instance, the Porsche Taycan, which runs on batteries, has almost 8,000 chips. According to Volkswagen, it will double or quadruple by the end of the decade.
“We have understood that we are a part of the semiconductor industry,” remarked Berthold Hellenthal, senior manager for semiconductor management at Volkswagen Group. “We have now people dedicated just to strategic semiconductor management.”
According to Evangelos Simoudis, a Silicon Valley venture capital investor and adviser who works with both established automakers and startups, finding and retaining chip engineers will be difficult for automakers because they will have to compete against companies like Alphabet Inc.’s Google, Amazon.com Inc., and Apple Inc. “I think that that would lead to acquisitions,” he said.
Simoudis said conventional automakers will have to balance manufacturing of historical auto models while they make new investments, in contrast to Tesla Inc., which designs its own core processors.
According to AutoForecast Solutions (AFS), since the start of 2021, microprocessor shortages have compelled automakers all over the world to reduce their planned production of approximately 13 million vehicles.
“It’s an arrogant industry,” according to Sam Fiorani, AFS’s vice president for worldwide vehicle forecasting. “Sometimes it just bites them in the rear.”