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Car manufacturing hit by global semiconductor shortage
- bradfa 6y agoAt least in the USA, due to COVID there has been lower than normal new car inventory at dealerships for the second half of 2020. This drove new car prices up which in turn drove used car prices up. At the end of 2020 it seemed like the inventory problems for new cars might be coming to a close in early 2021, but if this shortage of semiconductors is real then maybe early 2021 still won't see new and used car prices come back down for a bit longer.
- eulers_secret 6y agoDrove up new car prices, too: https://economics.td.com/us-vehicle-sales https://economics.td.com/us-vehicle-sales "From an automotive standpoint, dealership inventory remains lean – currently sitting at a nine-year low and down 22% for year-ago levels – which has already led to some reversal in the very generous summer incentives", which indicates higher prices. I couldn't find pricing data. This new shortage + current shortages + low interest rates = high prices on used/new. I was thinking of buying something last year, but now I think I'll wait until '22 or '23. (or if I can WFH, never!)
- bradfa 6y agoYeah, I was also hoping to buy a vehicle in 2020 but ended up holding off due to not driving nearly as much now and due to the prices going up. I was hoping prices would come back down in 2021 but we shall see...
- aNoob7000 6y agoI'm complete confused about the economy in the United States. You look at the news and all you hear about is the enormous amount of financial pain families are going through at this time. But then you hear about cars and trucks flying off of dealership lots. I guess I'll be holding onto my 2011 Honda Odyssey until it catches fire on the road.
- pkaye 6y agoI've heard its a K-shaped recovery. Some parts recovered quickly but others didn't. For example service and tourism didn't. But tech and construction is less impacted.
- aidenn0 6y agoThe average income (including stimulus checks) in the US went up, while at the same time lots of people losing their jobs. People who didn't lose their jobs (or have their hours curtailed), are doing significantly better because they aren't spending as much money and got stimulus checks. Meanwhile those who did lose their jobs are screwed. These people were probably also poorer before COVID hit, so fewer of them would have bought a new car absent COVID anyways. This is also why the stock market can't seem to crash; bond yields are super low, and there is more money being saved (and thus looking for investments) than ever. That's been the problem in the US for the past 45 years or so. We have a lot of wealth, it's just not particularly evenly distributed. Every single financial shock in my lifetime has made the problem worse.
- mark-r 6y agoI bought my new car exactly a week before being laid off.
- WrtCdEvrydy 6y ago> my 2011 Honda Odyssey until it catches fire on the road. Good luck, I bought a 2005 toyota corolla with the idea of driving it until it died. I am now concerned the car will bury me instead.
- wing-_-nuts 6y ago>I am now concerned the car will bury me instead. No that's the toyota krushchev
- d1zzy 6y agoIt's a bit easier to understand when you factor the fact that: 1. average US houshold income is very high 2. cars are a must (both for cultural and practical reasons), not a luxury Yes, in times of job loss and other economic strain consumers will stop buying certain things, but likely not cars (at first).
- vecinu 6y ago> I couldn't find pricing data. https://www.cargurus.com/Cars/price-trends/ https://www.cargurus.com/Cars/price-trends/ is a good reference for following used car pricing trends. All signs point to them going up and barely flattening now.
- mywittyname 6y agoUsed car price drops lag new car sales, since used cars cascade through the market for years.
- Baeocystin 6y agoUsed car pricing went sideways after the cash for clunkers program, and the market still hasn't re-normalized, at least here in California. I'm surprised at how long the effects are lasting.
- mywittyname 6y agoSorry, but this is bullshit pedaled by people who've never given an ounce of thought to the economics of car buying. C4C effected 700k cars from the 90s, all of which were worth less than $3,000. There were, at the time, roughly 250 million registered vehicles on the road. There's absolutely no chance that this had any effect what-so-ever on the market for used cars. 700k is literally a rounding error when compared to 250 million. What hurt the used car market was the fact that new car sales fell from roughly 15 million a year in 2008, to 9 million a year a year in 2009. It took until 2015 before cars sales reached that of 2008. All told 40 million fewer cars were produced between 2009 and 2015 compared with how many would have been produced if not for the GFC. Those 40 million cars that were never produced are what caused used car prices to spike. Not the 700k Ford Windstars and Explorers lost to C4C. Anyone who tells you different is a fool.
- Baeocystin 6y agoYou make good points.
- namdnay 6y agoThe whole “dealer inventory” thing seems so strange as an outsider. Is it specific to the US? Or North America? In Europe (or at least the European countries I’ve been in) and Japan, you go to the dealer, they will have a few showroom and test cars, and then you sit down, spec your car, haggle the price (this is changing in Europe with third parties who will negotiate for you), and then wait for your car to come out of the factory From time to time there will be a showroom car on sale that matches, especially if you’re near the end of that generation
- throwaway201103 6y agoIn the US (and I assume also Canada) it's almost the exact opposite. Custom order cars are possible, but rare. The vast majority of new cars sold are built with a factory-chosen set of options and sold from dealer inventory. Transferring a car from another nearby dealer if needed is also fairly common, if they had the particular color or option group the buyer wanted but the local dealer didn't.
- d1zzy 6y agoWhich made car shopping quite a hassle for me because I wanted something that isn't very common (non-sport trim with highest spec options and manual gear) but which wouldn't have been any problem at all for the manufacturer (since they list those options on their site for those models). But why do you think the system is setup this way? Car dealerships in the US having more money (or financing access) to keep stocks than other parts of the world? US customers wanting instant gratification for their purchase? (although, likely, anyone likes that over delayed car delivery, it's just that once you get used to instant car delivery is hard walk away from it)
- ky3 6y agoSpitballing here: more land in the US means lower cost to stock cars in dealerships. Also makes it easier to do an impulse purchase with all the easy financing available, compared to the European scenario of waiting for delivery (and possibly changing one's mind).
- jcpham2 6y agoFamily members works in parts quality (PQ) at a major automotive manufacturer. Once they crash the car and build the car to conform to the regulatory framework - the manufacturer of the parts in the car can't change. You must use the same Nippon semiconductors etc. That's the simple explanation I was told.
- iancmceachern 6y agoYou can change them, it just comes with a lot of design, testing, V&V and Manufacturing work to satisfy the needs of a robust QMS system for a regulated environment.
- _trampeltier 6y agoYes, that is true. I work in a factory who makes (mechanic) car parts. For example, if we buy a new machine, we have to send some pieces to the car company and they do some tests again. If think it is more, because who will pay the recall of all cars, if the new part is not in spec.
- flybrand 6y agoPPAP - production part approval process https://en.m.wikipedia.org/wiki/Production_part_approval_process https://en.m.wikipedia.org/wiki/Production_part_approval_pro...
- xvf22 6y agoTesla seem to do a lot of running changes, are they certifying each one?
- tobyjsullivan 6y agoI don't see why they'd be exempt, generally. Obviously they only need to certify the changes that make it to production but, yeah, that still seems like more than other automakers. I'm guessing one advantage Tesla has over traditional automakers is their entire company has been built around the existing regulatory environment. I'd be willing to bet their recertification process is quite streamlined compared to companies that have iteratively patched it on to their tradition vehicle design processes. Just a guess though; I have no background knowledge on this topic.
- andrewtbham 6y agopaywall?
- mgh2 6y agohttps://www.usa-vision.com/car-manufacturing-hit-by-global-semiconductor-shortage/ https://www.usa-vision.com/car-manufacturing-hit-by-global-s...
- airstrike 6y agoGoogle the headline and click through. FT doesn't block links referred from google.com
- deleted 6y ago[deleted]
- zinekeller 6y agoNB: Google and Bing works. Yahoo and DDG (and by extension lots of others) doesn't work.
- jnord 6y agohttps://archive.is/iXWDh https://archive.is/iXWDh
- cassepipe 6y agoAm I wrong to think it is a good thing ?
- maxerickson 6y agoIt won't mean much long term, it's more of a manufacturing shortfall than a shortage. The distinction I'm drawing is hand-wavy, but the point is that it's a planning disruption rather than a resource limit or whatever.
- jfoutz 6y agoGood distinction. The difference between eating all of dinner and still being hungry, versus eating all the food in the house and still being hungry. Hand waving metaphor, but more visceral.
- DoofusOfDeath 6y agoAwesome multilayered use of "visceral".
- bonestamp2 6y agoNot necessarily. Fewer cars is good for the environment. But, auto manufacturing, transportation, financing and sales are a huge part of the economy.
- dboreham 6y agoJust-in-time not so smart now eh?
- karmakaze 6y agoI was thinking why not make cars like cars, not smartphones. I hate when a car after a number of years is still perfect except for the extra bells and whistles.
- boddhi 6y agoWell there's a lot of safety features that require semiconductor components. Back up cameras, collision warning, lane assist, brake assist, tire pressure warning, etc. Humans are bad drivers.
- PHGamer 6y agowe dont need half of that stuff. backup cam is fine (because of the stupid b pillars now) , tire pressure warning is probably cheap enough and not going to be hard to fab at more open foundaries but lane assist and brake assist. naw, fucking drive your car . plus all that self driving stuff makes it easier for cars to be totalled and bring repairs up because of all the sensors.
- atom058 6y agoThe pillars are there to save lives during a crash. The lane assist and brake assist - along with adaptive cruise control - are great systems that also increase safety, if used properly. The difference in fatigue alone that these systems contrubute to is (anecdotally from my experience) night and day. I believe that the improved safety is worth the increasing complexity of maintenance.
- karmakaze 6y agoTaking this further. Statistically I might be better off with full autonomous as soon as available, but I wouldn't feel as bad if I crashed myself vs dying while letting the ML data do it's thing. If harm came to others, I'd still be the one who chose to buy/use it and only technically free. At some point I will change my opinion but it will have to be many many times better than humans.
- mistrial9 6y agocar manufacturing mysteriously hits unsolveable shortage at the very same time as industry-wide regulatory changes regarding carbon emissions are now inevitable ?
- snickms 6y agoThe article was paywalled for me, but if you made your cars in lisp, you'd run out of braces way before you ran out of semiconductors.
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- DoofusOfDeath 6y agoHN users downvote all but the highest-quality puns. I'd compile some examples for you, but I'm not sure how you'd interpret it :)
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- boddhi 6y agoI work for a Semiconductor distributor. Seeing huge orders from car manufacturers since December. I guess they are stockpiling.
- agumonkey 6y agoWhat would explain the supply shock and the stockpiling ?
- boddhi 6y agoWhen car manufacturers open up after Covid shutdown, they started seeing massive demands. We couldn't keep up with their demands since July. They learned their lesson from Covid and not taking any chances this year.
- agumonkey 6y agooh yeah.. I didn't foresee covid effects (obv in retrospect)
- airstrike 6y agoFor what it's worth, my somewhat educated guess from someone who covers Autos slightly: 2019 was expected to be a "peak" year in the automotive cycle, so everyone in the supply chain adjusted accordingly by modeling in lower demand following that peak. I'd wager with COVID-19 the trough came significantly faster (and deeper) than anticipated, and as we gear up for an equally fast (expected) recovery, inventory levels aren't adequate. Just a hypothesis, but perhaps worth considering.
- kazinator 6y agoThey sure learned a lesson in 2020 from toilet paper!
- Mountain_Skies 6y agoToilet paper hording works well if you're the one who got in on the hording early. If not, hope you have a bidet or washlet.
- NegativeLatency 6y agoMaybe they need to pay more then? or it's not actually an issue. I wonder what the margin on a car and associated components is. “The problem is, we are lower in the chain than companies like Apple and HP,” said one executive. “The automotive industry doesn’t pay that much for its semiconductors.”
- aidenn0 6y agoI have witnessed automotive companies looking at shaving fractions of pennies off of BoMs for ECUs. Obviously cost savings is only somewhat related to margins, but that's a datapoint. It would not surprise me to find out that Apple makes more money per iPhone manufactured than Toyota does per Corrolla, but I could definitely be wrong about that.
- WanderPanda 6y agoIf I remember correctly VW makes 400 Euro per car they sell in Germany (pre covid). I believe its just another example of Parkinsons Law (https://en.wikipedia.org/wiki/Parkinson%27s_law https://en.wikipedia.org/wiki/Parkinson%27s_law) and hope the legacy oems go bust rather sooner than later to free up the massive ressources they allocated inefficiently all the time.
- ChuckNorris89 6y agoBudget car makers are more like gaming console manufacturers and SaaS subscription services every year. They make almost no money when they sell you the car but they make all of it back from overpriced optional extras, the maintenance services you have to take at the overpriced authorized dealer and through their financing services. I live in Europe and keep pondering moving to a bigger city and downsize just to give up the need of a car since the maintenance and the rest of the costs are going up faster than my pay. I can see a lot of low-middle class people getting screwed by the rising costs of car ownership long term.
- notJim 6y agoHow is that Parkinson's law and not a success story of market competition? Isn't it that the highly competitive car market forces legacy manufacturers to accept lower margins? If anything, we should welcome greater competition to drive down the margins of electric car makers.
- ficklepickle 6y agoI couldn't read this article, but another spelled it out: "Industry officials say semiconductor companies diverted production to consumer electronics during the worst of the COVID-19 slowdown in auto sales last spring. Global automakers were forced to close plants to prevent the spread of the virus. When automakers recovered, there weren't enough chips." So it should be temporary.
- blueintegral 6y agoI'm not in the car industry, but I am in the electronics industry and I have definitely felt the chip shortage. Some of my parts just aren't available, and lead times are 3-4 months. Seems to be the result of production stopping at the beginning of the pandemic and they still haven't caught up.
- stephen_g 6y agoYeah, definitely noticed this. For example, I designed something (low volume) at the start of 2020 with a precision gyroscope that was easily available with over a hundred in stock each at Digikey, Mouser, Avnet etc. and when it came to starting building them around October/November, nobody had any parts of any of the variants in stock and the lead time said 22 weeks... Although looking now for that part at least the shortage seems to be easing - there are about a dozen showing up as available across a few places on Octopart and the lead time seems to have dropped back to eight weeks.
- __sy__ 6y agoI was on a call with our Future Electronics reps yesterday and they more or less said the same. Every CM is booked to capacity as well. They said it's a combination of stopping production for almost 3 months and then an explosion of latent demand for consumer devices + WFH demand. Btw, another interesting ramification of both the trade war with China and the travel restrictions is that a lot of low/mid scale electronic manufacturing is being moved to Mexico.
- blueblisters 6y ago> Btw, another interesting ramification of both the trade war with China and the travel restrictions is that a lot of low/mid scale electronic manufacturing is being moved to Mexico. That's a first I have seen manufacturers moving to a country with similar wage levels. Last I heard, wasn't a lot of manufacturing shifting to Vietnam, Malaysia and to some extent, India?
- blueblisters 6y agoIt's true for a lot of commodities too. The prices for Steel have increased to over 45% of the price levels seen in January 2020. Capacity isn't coming up fast even enough to meet the demand, and manufacturers won't invest in new capacity because they know the demand is transient.
- anonytrary 6y agoStupid question: does this have anything to do with the recent cryptocurrency boom? This always seems to happen right around the time people start scooping up GPUs and such.
- joezydeco 6y agoNo. For every Tesla with a GPU there are hundreds of vehicles rolling off the lines with dozens of microcontrollers in each one.
- anonytrary 6y agoGotcha, thanks.
- fgonzag 6y agoHundreds most likely. They're really small processors though, 1MB memory tops for non critical systems (like the Microchip PIC)
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- Pick-A-Hill2019 6y agoBased on other sources of this story it basically goes like this - 1) Covid hits and sales and demand for new cars drop. 2) Automotive Industry cancels a load of silicon orders. 3) Covid hits and there is a surge in demand for replacement/upgraded IT equipment. 4) Silicon Fabs adapt and take up the slack / Re-Tool 5) Automotive experiences a sudden surge 6) Silicon Fabs go - Uhmm yeah, you are going to have to wait. [Hit the FT Paywall so am not commenting directly on the linked article]
- axelthegerman 6y agoMaybe they can just sell their millions of cars built in the last few years and sitting on lots all across the globe...