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The car industry has fucked everyone over and noone is immune, regardless how big. If you're interested in how this happened, I wrote my understanding of it on

The car industry has fucked everyone over and noone is immune, regardless how big. If you're interested in how this happened, I wrote my understanding of it on another, related thread at https://news.ycombinator.com/item?id=26659709 https://news.ycombinator.com/item?id=26659709

hahahahe 6y ago
That’s very interesting. My immediate reaction to the pandemic was less driving but by May ‘20 I too realized people will have to buy cars (outflow from urban areas and less public transit usage).
kortilla 6y ago
Good description but from what you’ve said the car industry didn’t “lie”. Definition of “lie”: > A lie is an assertion that is believed to be false, typically used with the purpose of deceiving someone The car industry fucked up a forecast and cancelled based on their forecast. That’s not a lie.
- User23 6y ago
  Indeed, you can say something false because you're a liar (or bullshitter), but you can also say something false because you're just wrong.
  - th0ma5 6y ago
    Yup, and it took a long time for journalism to describe Trump's falsehoods as lies because they merely thought him dumb or misinformed. It took a while for it to become apparent that he knew what he was saying was not true and that the correct term was that he was lying.
    - deleted 6y ago
      [deleted]
  - th0ma5 6y ago
    Yup, and it took a long time for journalism to describe Trump's falsehoods as lies because they merely thought him dumb or misinformed. It took a while for it to become apparent that he knew what he was saying was not true and that the correct term was that he was lying...
bmurphy1976 6y ago
That's a pretty disingenuous take that completely ignores the lack of fabs and a global pandemic. Nobody knew what was going to happen and everybody made decisions that they regret. The industry is in the position it's in because of the sum total of decisions made by all actors over the last decade, not because the car companies made some forecasting mistakes. The car companies aren't the only ones who just-in-time their supply lines.
- genmud 6y ago
  Dude, that isn't disingenuous at all. The car companies did this across the board to their entire supply chain. In fact, I know some folks who relied on that business and had to close up shop because they basically had machines they bought specifically for auto manufacturers and they cancelled ALL their orders at the same time, with no ETA on when they would place the orders again. They knew there was a pandemic, they knew the supply chain would be wonky and they just assumed it would start back up without delay when they were ready to make cars. They pushed the risk to their suppliers and when they went to place orders and everyone else had booked their capacity, laid off the employees or suppliers went out of business they were like "OMG HOW DID THIS HAPPEN!?". Talking to some of the people I know, this is an unmitigated disaster that is entirely the auto manufacturers fault. There should be no sympathy for these idiots.
maxerickson 6y ago
So there's a legitimate demand increase and supply disruption, and you are saying the explanation is that some companies canceled and then renewed orders? Seems like the demand increase and supply disruption would explain a lot of it.
zsmi 6y ago
That's the general consensus I see too. i.e. https://www.electronicdesign.com/markets/automotive/media-gallery/21156779/electronic-design-the-global-chip-shortage-explained/slideshow https://www.electronicdesign.com/markets/automotive/media-ga... The other issue is the "car industry" doesn't order from fab. They order from a supplier of a module, who orders from a chip designer, who orders from a fab. And that's probably not accurate either as it leaves out plenty of middlemen.
slg 6y ago
How would this process have been different if the car manufactures didn't make this mistake? I am a layman, but after reading that it still sounds like increased demand and temporarily reduced supply for chips is the root cause and not the car industry failing to understand their own demand.
- rtpg 6y ago
  In practice people have been back in factories doing work since summer of last year. If we had changed absolutely nothing, then the "supply gap" would have been just those 3 months. But what happened instead was everyone changed their plans for all of 2020/2021 and cancelled like all their orders. So everyone downstream handles that by shutting stuff down, firing people, etc. But 3 months later everyone shows back up and is like "oh wait no actually give us the normal production back". Meanwhile all your laid off staff is just working elsewhere. I'm also a layman, but my feeling has been that the "stop everything! no wait start everything back up" has been way more of an issue than the actual production stoppage (which only was a couple of months! Remember how everyone was dragged back into work a couple months into the pandemic?) I'm sure I'm extremely simplifying things here though and might be outright wrong though.
  - slg 6y ago
    >If we had changed absolutely nothing, then the "supply gap" would have been just those 3 months. It wouldn't work like that because demand increased and supply decreased at the same time creating a backlog that one would expect to last longer than the period of decreased supply. Let's make up some numbers to show this. Imagine normal supply and demand is for 100 units per month. The pandemic hits and supply is now at 0, 25, and 50 for the next three months before returning to normal. Meanwhile demand goes to 75, 100, and then sticks at an elevated demand of 125. In those three months, the industry has produced 75 units, but the market needed 300 units creating a built up demand for an additional 225 units that doesn't simply go away. That backlog can never be satisficed as long as demand stays elevated and supply is normal. The suppliers actually have to increase production beyond both normal demand and current demand. Maybe they are able to adjust and produce 150 units per month starting in month four. That gives them a surplus of 25 units a month which means it is still another 9 months before all the built up demand is satisfied. It would therefore take a full year before the impact of that 3 month disruption dissipates. That is obviously a rudimentary example, but it shows how a combination of decreased supply and increased demand can cause issues that last longer than the change on either side of the market.
eric_b 6y ago
Ermmmm, I don't understand how this is the "car industry fucking everyone over". Even if what you wrote is true - it's just the market at work. If the car companies can pay enough to get slots in a fab and beat out smaller players so be it. The demand for semiconductors currently exceeds supply. This means there will be shortages, price increases etc, until further capacity can be brought online or demand is lowered. I don't think there's any "bad guys" here.
- PeterisP 6y ago
  Also it's worth noting that "A can afford to pay a higher surcharge than B in order to get slots in a fab" essentially means "the consumers are voting with their wallets that getting A without delay is more important than getting B without delay". Prices, and the willingness to tolerate an increase in them, is the ultimate signal of what people actually consider important, as opposed to just 'empty words' claims of importance.
pojzon 6y ago
Thank you for the insight, explanation was easy to follow even for someone not related to that kind of work.
clairity 6y ago
part of what happened is described by the bullwhip effect[0], where oscillations in supply and demand essentially resonate as they ripple through the whole distribution channel. in this case, the effect was created and amplified primarily by the car industry, and thus their culpability in the supply crunch across industries. [0]: https://en.wikipedia.org/wiki/Bullwhip_effect https://en.wikipedia.org/wiki/Bullwhip_effect

hahahahe 6y ago

That’s very interesting. My immediate reaction to the pandemic was less driving but by May ‘20 I too realized people will have to buy cars (outflow from urban areas and less public transit usage).

kortilla 6y ago

Good description but from what you’ve said the car industry didn’t “lie”. Definition of “lie”: > A lie is an assertion that is believed to be false, typically used with the purpose of deceiving someone The car industry fucked up a forecast and cancelled based on their forecast. That’s not a lie.

User23 6y ago
Indeed, you can say something false because you're a liar (or bullshitter), but you can also say something false because you're just wrong.
- th0ma5 6y ago
  Yup, and it took a long time for journalism to describe Trump's falsehoods as lies because they merely thought him dumb or misinformed. It took a while for it to become apparent that he knew what he was saying was not true and that the correct term was that he was lying.
  - deleted 6y ago
    [deleted]
- th0ma5 6y ago
  Yup, and it took a long time for journalism to describe Trump's falsehoods as lies because they merely thought him dumb or misinformed. It took a while for it to become apparent that he knew what he was saying was not true and that the correct term was that he was lying...

bmurphy1976 6y ago

That's a pretty disingenuous take that completely ignores the lack of fabs and a global pandemic. Nobody knew what was going to happen and everybody made decisions that they regret. The industry is in the position it's in because of the sum total of decisions made by all actors over the last decade, not because the car companies made some forecasting mistakes. The car companies aren't the only ones who just-in-time their supply lines.

genmud 6y ago
Dude, that isn't disingenuous at all. The car companies did this across the board to their entire supply chain. In fact, I know some folks who relied on that business and had to close up shop because they basically had machines they bought specifically for auto manufacturers and they cancelled ALL their orders at the same time, with no ETA on when they would place the orders again. They knew there was a pandemic, they knew the supply chain would be wonky and they just assumed it would start back up without delay when they were ready to make cars. They pushed the risk to their suppliers and when they went to place orders and everyone else had booked their capacity, laid off the employees or suppliers went out of business they were like "OMG HOW DID THIS HAPPEN!?". Talking to some of the people I know, this is an unmitigated disaster that is entirely the auto manufacturers fault. There should be no sympathy for these idiots.

maxerickson 6y ago

So there's a legitimate demand increase and supply disruption, and you are saying the explanation is that some companies canceled and then renewed orders? Seems like the demand increase and supply disruption would explain a lot of it.

zsmi 6y ago

That's the general consensus I see too. i.e. https://www.electronicdesign.com/markets/automotive/media-gallery/21156779/electronic-design-the-global-chip-shortage-explained/slideshow https://www.electronicdesign.com/markets/automotive/media-ga... The other issue is the "car industry" doesn't order from fab. They order from a supplier of a module, who orders from a chip designer, who orders from a fab. And that's probably not accurate either as it leaves out plenty of middlemen.

slg 6y ago

How would this process have been different if the car manufactures didn't make this mistake? I am a layman, but after reading that it still sounds like increased demand and temporarily reduced supply for chips is the root cause and not the car industry failing to understand their own demand.

rtpg 6y ago
In practice people have been back in factories doing work since summer of last year. If we had changed absolutely nothing, then the "supply gap" would have been just those 3 months. But what happened instead was everyone changed their plans for all of 2020/2021 and cancelled like all their orders. So everyone downstream handles that by shutting stuff down, firing people, etc. But 3 months later everyone shows back up and is like "oh wait no actually give us the normal production back". Meanwhile all your laid off staff is just working elsewhere. I'm also a layman, but my feeling has been that the "stop everything! no wait start everything back up" has been way more of an issue than the actual production stoppage (which only was a couple of months! Remember how everyone was dragged back into work a couple months into the pandemic?) I'm sure I'm extremely simplifying things here though and might be outright wrong though.
- slg 6y ago
  >If we had changed absolutely nothing, then the "supply gap" would have been just those 3 months. It wouldn't work like that because demand increased and supply decreased at the same time creating a backlog that one would expect to last longer than the period of decreased supply. Let's make up some numbers to show this. Imagine normal supply and demand is for 100 units per month. The pandemic hits and supply is now at 0, 25, and 50 for the next three months before returning to normal. Meanwhile demand goes to 75, 100, and then sticks at an elevated demand of 125. In those three months, the industry has produced 75 units, but the market needed 300 units creating a built up demand for an additional 225 units that doesn't simply go away. That backlog can never be satisficed as long as demand stays elevated and supply is normal. The suppliers actually have to increase production beyond both normal demand and current demand. Maybe they are able to adjust and produce 150 units per month starting in month four. That gives them a surplus of 25 units a month which means it is still another 9 months before all the built up demand is satisfied. It would therefore take a full year before the impact of that 3 month disruption dissipates. That is obviously a rudimentary example, but it shows how a combination of decreased supply and increased demand can cause issues that last longer than the change on either side of the market.

eric_b 6y ago

Ermmmm, I don't understand how this is the "car industry fucking everyone over". Even if what you wrote is true - it's just the market at work. If the car companies can pay enough to get slots in a fab and beat out smaller players so be it. The demand for semiconductors currently exceeds supply. This means there will be shortages, price increases etc, until further capacity can be brought online or demand is lowered. I don't think there's any "bad guys" here.

PeterisP 6y ago
Also it's worth noting that "A can afford to pay a higher surcharge than B in order to get slots in a fab" essentially means "the consumers are voting with their wallets that getting A without delay is more important than getting B without delay". Prices, and the willingness to tolerate an increase in them, is the ultimate signal of what people actually consider important, as opposed to just 'empty words' claims of importance.

pojzon 6y ago

Thank you for the insight, explanation was easy to follow even for someone not related to that kind of work.

clairity 6y ago

part of what happened is described by the bullwhip effect[0], where oscillations in supply and demand essentially resonate as they ripple through the whole distribution channel. in this case, the effect was created and amplified primarily by the car industry, and thus their culpability in the supply crunch across industries. [0]: https://en.wikipedia.org/wiki/Bullwhip_effect https://en.wikipedia.org/wiki/Bullwhip_effect