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Originally Posted by NevadaGeo
I still haven't heard why Ford let those trucks sit for 2 years while waiting on the chip, instead of making the truck run with out those chips. Didn't we run with out chips for a hundred years?
And why did it take two years to make chips. Seems like they built whole aircraft carriers in less time during the war.
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I just retired from designing integrated circuits (e.g. 'chips') for the last 35 years.
Couple of points to to consider to help understand what is going on.
Automobile manufacturers are concerned about safety and reliability. Because of this, it usually takes 10-15 years to qualify a chip manufacturing process and the chips that are built using that process for automotive applications.
Chip manufacturing technology advances to the next generation of capabilities every 1.5 years, so 15 years of calendar time represents 10 generations of chip manufacturing technology.
We reach point #1: critical chips used in automobiles are generally built in old and out of date factories for which little or no additional investment is justified as far as the chip factory owners are concerned.
Point #2: it takes 6 months to build chips and ship them to automotive manufacturers.
Point #3: chip manufacturers schedule production 6 months to a year in advance and often allocate a percentage of their factory production capacity to a customer under a contractual commitment. These contracts can span years of production.
Point #4: these older chip factories are completely utilized. There is zero excess capacity.
Next topic: automakers use a 'just in time' car assembly process. I.e. They do not maintain much inventory of parts used to assemble vehicles. There system assumes that parts arrive in a steady stream 'just in time' to be used.
Point #5: just in time manufacturing means that any disruption in any delivery of parts will shut down the car manufacturing assembly line.
Next topic: The same older chip factories (these are called 'fabs', which is a short hand designation for chip fabrication facilities) are used to build the less exciting, less costly, but critical components used in consumer electronics and computer equipment. Such as power supply chips, USB chips, etc. There are hundreds of these chips built using older fabs inside laptops and desktop computers.
Point #6: When people worked at home and quarantined at home during the Pandemic, the demand for computers, computer monitors, Tv's, etc skyrocketed.
Point #7: Demand for new vehicles during the Pandemic plunged and was not expected to recover quickly. So automobile manufacturers drastically reduced their orders for chip production and canceled their contracts for their allocation of chip production facilities.
Point #8: chip manufacturers reallocated their limited production capacity in the older chip fabs to the booming consumer electronics market and accepted new contracts for production allocation. Remember, these contracts can span years.
Point #9: chip factories cost billions of $ and take 4 years or so to construct.
I hope you are getting the idea of how ugly this situation is for automobile manufacturers.
When they canceled their chip production orders, they pretty much permanently lost their contracted capacity for chips that take as much as 6 months to build, that are often scheduled for production 6 months or more in advance, in factories that have no excess or spare capacity.
The chip factory owners have no financial incentive to construct new factories for chip manufacturing processes that are 10 generations old. This is analogous to asking automobile manufacturers to replicate the factories used to build cars back the 1970's. Why the heck would they want to do that? Even if chip manufacturers decided to do build new fabs for older chip manufacturing processes, remember point 9 above. It takes 4 years to build a new factory.
The moral of the story is that automobile manufacturers screwed up and in doing so, also screwed themselves and any people who needed to buy a new car.
I laughed last year when I heard the idiot talking heads on TV saying that the automotive chip shortage would be over by the end of 2021. And then laughed again in mid 2022, when the same idiots projected normality by the end of 2022.
The reality is that the automobile manufacturers created a semi-permanent f'up situation. The only cure is for the automobile manufacturers to redesign their equipment to use chips that are made in more recently developed, more advanced chip manufacturing processes for which far greater production capacity exists. Note: It will take years to redesign their products and go through their rigorous safety and reliability testing and qualification procedures for the new products.
I hope this long winded explanation helps clarify why the current situation will not end anytime soon.
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