Ford Motor Company and General Motors want to produce their own computer chips.
The development occurs as supply chain bottlenecks impact the availability of semiconductors and other key inputs for American firms.
The Wall Street Journal reports:
Ford on Thursday morning said it had entered into a strategic agreement with U.S.-based chip maker GlobalFoundries Inc. to develop chips, a pact that could eventually lead to joint production in the U.S. The two companies didn’t disclose terms or say how much they might invest in future production capacity.
Shortly after, GM President Mark Reuss said GM was also trying to forge deeper ties with chip makers, striking strategic partnerships that could lead it to co-develop semiconductors and potentially produce them jointly. The move is part of a strategy to reduce variation in the microprocessors it uses in vehicles, he said.
The outlet adds that the chip shortage is limiting production and forcing automakers to reconfigure their global supply chains:
The semiconductor shortage has scuttled output of millions of planned vehicles industrywide this year. Some car executives have said they are taking steps to get a better handle on their chips, a critical piece of the supply chain into which they have had little visibility.
Ford is the latest example of companies realigning their business models as they grapple with the pandemic-related disruptions. Multinational companies got an early shock in the Covid-19 crisis when border closings, local restrictions and lockdowns caused chaos. Some have decided on permanent solutions.
Beyond car manufacturers, CNBC observes that the global computer chip shortage hurts businesses in multiple sectors: “As technology has advanced, semiconductor chips have spread from computers and cars to toothbrushes and tumble dryers — they now lurk beneath the hood of a surprising number of products.”
Tesla chief executive Elon Musk commented earlier this year that he has “never seen anything like” the semiconductor shortage.
“Our biggest challenge is supply chain, especially microcontroller chips,” Musk said on Twitter. He then compared the company’s decision to “overorder” various products to the “toilet paper shortage” that occurred at the outbreak of COVID-19 in the United States.
For the past several months, shipping vessels delivering consumer goods from Asian markets have idled in the Pacific Ocean as the United States endures labor shortages, creating bottlenecks in the ports of Los Angeles and Long Beach. Retailers across the United States are therefore short on inventory to meet rising consumer demand.
Investors, however, see no immediate end in sight to the crisis. During an interview with CNBC, Paul Meeks — who led Merrill Lynch’s technology fund during the dot-com bubble and currently works as a professor at The Citadel — said that the bottlenecks may last until 2023.
“Some of these companies actually will not be able to ship units. And if they can’t ship units, they might disappoint on their earnings,” he explained. “Their stocks are so expensive that they could go down. Not go down a bit, they could go down a lot.”
“It’s a bummer and unfortunately, there’s not any relief,” he continued. “It’ll also hit the top and bottom lines of some of these vendors that are selling those hot Christmas products.”