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frmrCapCadet
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Chips, Cars, (and even planes)

Mon May 17, 2021 3:34 pm

https://www.bloomberg.com/hyperdrive

The above link may not be specific to the article on the big, even bigger than thought a month ago, hit automotive production is talking. Four million or so cars not manufactured, over $100 billion in missed revenue for 2021. Major consumers of chips need to be more aggressive at ensuring supply lines. If they cannot learn to do it then governmental industrial policy must do it. The major US car manufacturers (amongst others) should seek antitrust exemptions and consider consortiums for building the plants to make the chips they need.

And speaking of industrial policy, it is utterly silly for the US to unilaterally disarm itself as all of our major competitors rely on industrial policy to beat the crap out of us in manufacturing. These policies, at their best, would involve researchers, universities, unions, major corporations. The rights of all stakeholders, and of small businesses would be addressed. This, of course, would require Republicans to have a purpose in life more than just gaining power and destroying democratic government. Before that newt, Gingrich, and his reptilian brain took over the Republican party members of that party were leaders in this sort of thinking.
 
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c933103
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Re: Chips, Cars, (and even planes)

Mon May 17, 2021 4:15 pm

https://newswitch.jp/p/26070
TSMC seems to be seeing many problems for the American factory they're building, just the factory construction cost is said to be six times higher than the cost in Taiwan, and labour cost are also 30% higher despite lower productivity, and regulation also make it not possible to just port the supply chain they built in Taiwan directly to the US, in addition to lack of logistic network for semiconductor materials in the US compared to East Asia
 
Ken777
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Re: Chips, Cars, (and even planes)

Mon May 17, 2021 8:26 pm

One major problem is that the auto industry is. slave to "Just In Time Manufacturing" and didn't plan for the potential impact of a factory fire in the chip industry. When that fire hit there was insufficient chis on hand and existing in the delivery pipeline to avoid this crisis. Folks going to the Kentucky Derby passed a large field that had 20,000+ Ford F-150 trucks parked and waiting for chips. When the chips do arrive at some point in the future they will be installed and each truck will need to go through an extensive testing program.

So how much has JIT manufacturing saved Ford (as well as other companies in their position?

Apple is the classic example of planning ahead and ensuring supply. That is not ont ordering a huge number of components, but also financing the supplier's new plants and investing in R&D. That way they are g0ing full speed while some companies are stuck in idle.
 
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c933103
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Re: Chips, Cars, (and even planes)

Mon May 17, 2021 8:40 pm

Ken777 wrote:
One major problem is that the auto industry is. slave to "Just In Time Manufacturing" and didn't plan for the potential impact of a factory fire in the chip industry. When that fire hit there was insufficient chis on hand and existing in the delivery pipeline to avoid this crisis. Folks going to the Kentucky Derby passed a large field that had 20,000+ Ford F-150 trucks parked and waiting for chips. When the chips do arrive at some point in the future they will be installed and each truck will need to go through an extensive testing program.

So how much has JIT manufacturing saved Ford (as well as other companies in their position?

Apple is the classic example of planning ahead and ensuring supply. That is not ont ordering a huge number of components, but also financing the supplier's new plants and investing in R&D. That way they are g0ing full speed while some companies are stuck in idle.

It's not just the fire. Early on in the pandemic auto industry cut their order due to weakened supply, and as chips for cars are usually lower ends, chip fabs see no reason to keep those excess lines running after order cuts. Then as demand rebounce and they want more chips to make more cars, they only then learned that the capacity is no longer available.
 
ThePointblank
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Re: Chips, Cars, (and even planes)

Mon May 17, 2021 10:28 pm

The semiconductor shortage is also affecting other sectors as well.

Most of the chip shortages you are seeing is on the lower end processes. What's also being affected is also the higher end, high performance stuff as well.

For example, try looking at any computer part retailer for a high end graphics card; practically impossible to get these days, other than via scalpers and lottery allocations. Game consoles, tablets, TV's, phones, they are all affected.
 
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Aesma
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Re: Chips, Cars, (and even planes)

Tue May 18, 2021 12:39 am

Should the US and Europe have semiconductor manufacturing plants covering most of their needs ? Absolutely. That's ultra high tech stuff, not basic things that usually get offshored.

How to do it from the current state of affairs, I don't know, it's not that easy.
 
ThePointblank
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Re: Chips, Cars, (and even planes)

Tue May 18, 2021 7:38 am

Aesma wrote:
Should the US and Europe have semiconductor manufacturing plants covering most of their needs ? Absolutely. That's ultra high tech stuff, not basic things that usually get offshored.

How to do it from the current state of affairs, I don't know, it's not that easy.

This shortage was caused by poor planning by automakers during the pandemic.

Basically, when the pandemic happened, automakers cancelled orders for chips used in car electronics systems like driver assistance and navigation control as their factories got idled for parts of the pandemic. In response, chip makers reassigned production capacity to other business sectors, supporting companies making smartphones, laptops and gaming devices as those saw a major spike in demand that hasn't really abated yet.

When car sales bounced back faster than expected late last year and carmakers tried to ramp up production again, chip factories could not respond fast enough given the long lead times needed to schedule orders. The industry typically requires a lead time anywhere from 6-9 months from a purchase order being placed to actually going into production, so sudden spikes in demand can really throw spanners into the works because chip makers need a lot of lead time to adjust production.

As for chip fabs in the US and Europe; they do exist; Intel, Texas Instruments, Micron, NXP, and Global Foundries are the big names in the US and EU market. But the really big fabs are located in Taiwan, South Korea, Japan, Singapore and China.
 
tommy1808
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Re: Chips, Cars, (and even planes)

Tue May 18, 2021 7:41 am

ThePointblank wrote:
The industry typically requires a lead time anywhere from 6-9 months from a purchase order being placed to actually going into production, so sudden spikes in demand can really throw spanners into the works because chip makers need a lot of lead time to adjust production.


We are currently seeing 12 Month lead times on plenty of components, even bog standard stuff like audio chips or LAN nic.

best regards
Thomas
 
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Aesma
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Re: Chips, Cars, (and even planes)

Tue May 18, 2021 9:08 am

ThePointblank : you forgot STMicroelectronics

Apparently one problem is that clients are unwilling to pay more, and thus STMicro for example is unwilling to invest more.
 
ThePointblank
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Re: Chips, Cars, (and even planes)

Tue May 18, 2021 9:51 am

Aesma wrote:
ThePointblank : you forgot STMicroelectronics

Apparently one problem is that clients are unwilling to pay more, and thus STMicro for example is unwilling to invest more.

The higher end stuff generally pays more, and that is experiencing a major shortage right now. And the biggest player on the market, TSMC, is dumping $100 billion in capital investments over the next few years to expand fab capacity.

As I noted, look at the graphics card market right now for anything mid-tier or high end released within the last 2 years (e.g. Nvidia GeForce RTX 2060 and higher). Zero availability from any major retailer. Prices from scalpers are through the roof and often in many times that of MSRP.

A major factor in the issues is also lead times for the tooling and equipment to make semiconductors; those have a multiyear lead time from ordering to actually coming online. Not many companies make those machines, with one company effectively controlling the majority of the higher end market: Dutch company ASML Holdings. They have roughly 2/3's of the world market for lithographic machines total, with a practical monopoly on the higher end stuff, while other companies battle it out for the lower end markets.

FYI, if you want to get an idea of what the key players in the industry are saying, see this recent earnings call transcript from TSMC:

https://www.nasdaq.com/articles/taiwan- ... transcript
 
petertenthije
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Re: Chips, Cars, (and even planes)

Tue May 18, 2021 10:17 am

Aesma wrote:
Should the US and Europe have semiconductor manufacturing plants covering most of their needs ? Absolutely. That's ultra high tech stuff, not basic things that usually get offshored.
So how do you propose to do that?

It takes months to make the machines that manufacture chips.

And then you've got to take politics into account. Earlier this year China placed an order for EUV machines with ASML. These are the most advanced machines available. The USA is trying to block this sale to preserve their economic and military interests. ASML is a Dutch company, but somehow the USA feels it necessary to but in. As the (Dutch) article says "the USA stress that they always want to keep at least two generations technological lead on China".

Not only are the USA trying to block the sale of EUV machines, but also of DUV machines (previous generation). The EUV is made solely by ASML, the DUV machine are also made by Nikon in Japan.
https://www.techzine.nl/nieuws/infrastr ... er-krijgt/
 
LCDFlight
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Re: Chips, Cars, (and even planes)

Tue May 18, 2021 10:54 am

In a normal market, you need several fungible suppliers that you can choose between. Otherwise it is a total monopoly and the maker can set the price to infinity (or just stop selling to you, dooming your product).

Automakers should have thought about strategic sourcing. Chip industry is too concentrated with too few suppliers. Their products are not cross compatible enough (evidently). I still believe the free market sorts out product shortages unless there is some constraint on market activity. A lead time of 2 years should deliver any capacity of chips we need.

Lastly I do not think the manufacturing needs to occur in the US. Mexico is just as good. Or India. But a supply base does need to be built outside of SE Asia.
 
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Aesma
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Re: Chips, Cars, (and even planes)

Tue May 18, 2021 11:28 am

ThePointblank : I'm sure there are competent people who know what to do. However this is clearly not something short term that will solve the current problem. That's something long term that would prevent it from happening again.

Same for countries like Japan without vaccine production, they might want to remediate that.
 
frmrCapCadet
Topic Author
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Re: Chips, Cars, (and even planes)

Tue May 18, 2021 12:41 pm

sorry for the pun, but FABulous links. I had never read an earnings call such as that of TSMC, so did not know how much I actually want to know about that. If you read carelessly it almost sounds like gobbledygook and double speak. But the questions are very serious as are the answers. But yeow! this world is one complicated universe.
 
ThePointblank
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Re: Chips, Cars, (and even planes)

Tue May 18, 2021 12:44 pm

petertenthije wrote:
Aesma wrote:
Should the US and Europe have semiconductor manufacturing plants covering most of their needs ? Absolutely. That's ultra high tech stuff, not basic things that usually get offshored.
So how do you propose to do that?

It takes months to make the machines that manufacture chips.

And then you've got to take politics into account. Earlier this year China placed an order for EUV machines with ASML. These are the most advanced machines available. The USA is trying to block this sale to preserve their economic and military interests. ASML is a Dutch company, but somehow the USA feels it necessary to but in. As the (Dutch) article says "the USA stress that they always want to keep at least two generations technological lead on China".

Not only are the USA trying to block the sale of EUV machines, but also of DUV machines (previous generation). The EUV is made solely by ASML, the DUV machine are also made by Nikon in Japan.
https://www.techzine.nl/nieuws/infrastr ... er-krijgt/

EUV and DUV machines are made with US technology, so there is a requirement for US approval for export. There is also further review under the purview of the Wassenaar Arrangement, which controls the export of certain sensitive dual-use technologies.
 
petertenthije
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Re: Chips, Cars, (and even planes)

Tue May 18, 2021 1:30 pm

ThePointblank wrote:
EUV and DUV machines are made with US technology, so there is a requirement for US approval for export. There is also further review under the purview of the Wassenaar Arrangement, which controls the export of certain sensitive dual-use technologies.
The article actually refers tot he Wassenaar treaty as well.

While EUV is not mentioned in the treaty (or at least not in the article), the DUV machines are mentioned. Export of DUV's are allowed as per the treaty. But for these as well the USA is trying their best to block sales.
 
ThePointblank
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Re: Chips, Cars, (and even planes)

Tue May 18, 2021 3:08 pm

petertenthije wrote:
ThePointblank wrote:
EUV and DUV machines are made with US technology, so there is a requirement for US approval for export. There is also further review under the purview of the Wassenaar Arrangement, which controls the export of certain sensitive dual-use technologies.
The article actually refers tot he Wassenaar treaty as well.

While EUV is not mentioned in the treaty (or at least not in the article), the DUV machines are mentioned. Export of DUV's are allowed as per the treaty. But for these as well the USA is trying their best to block sales.

Any time there is an export of certain dual use technologies to a party outside the Wassenaar Arrangement signatories, it prompts a review. Lithographic machines used for computer chip making is a dual use item under the Wassenaar Arrangement.
 
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Aesma
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Re: Chips, Cars, (and even planes)

Tue May 18, 2021 4:18 pm

I wonder if the Dutch could make some noise about US arms exports to countries like Saudi Arabia, in retaliation ?
 
ThePointblank
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Re: Chips, Cars, (and even planes)

Tue May 18, 2021 5:28 pm

Aesma wrote:
I wonder if the Dutch could make some noise about US arms exports to countries like Saudi Arabia, in retaliation ?

Wassenaar isn't legally binding, merely that other member states be notified about the proposed export and that the exporting country have robust export control regimes for items listed under Wassenaar.

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