Comment by peter_d_sherman | Hacker News Reader

Comment by peter_d_sherman | Hacker News Reader

peter_d_sherman

>"On january 13th Honda, a Japanese carmaker, said it had to shut its factory in Swindon, a town in southern England, for a while. Not because of Brexit, or workers sick with covid-19. The reason was a shortage of microchips. Other car firms are suffering, too. Volkswagen, which produces more vehicles than any other firm, has said it will make 100,000 fewer this quarter as a result. Like just about everything else these days—from banks to combine harvesters—cars cannot run without computers."

https://www.auto123.com/en/news/the-devastating-effects-of-a...

>"While car enthusiasts the world over are worried about assembly plant closures following the earthquake that ravaged Japan, many are still unaware of the significant role played by companies working at the start of the colossal logistical chain that results in the production of a vehicle.

Did you know that a single vehicle uses from 30 to over 100 chips

to control things like the parking brake, stereo, power steering and safety systems such as stability control? Development of these components is extremely complex, and only a handful of companies are able to meet the demands of the world’s automotive giants."

PDS: The world's automobile manufacturers, that is,

the world's carmakers --

would, or should have, a collective interest in IC/Chip fabrication -- especially in light of the most recent shortage...

According to the news sources I've been reading[0], this is a management failure by auto companies rather than some kind of structural issue with the chip industry. So it doesn't really make sense to me that automakers might build their own fab. They're the problem, not the fab. They're crying to the newspapers because it looks bad to admit they were cheap and will have to furlough workers. Politicians are playing along with the shortage angle, because when you save a worker's job they tend to vote for you. I predict the end result will be politicians spending taxpayer money to make filling these orders worth the fab's time.

>Mr Duesmann described the problems as “a crisis upon a crisis”. Demand for cars slumped for much of last year because of the coronavirus pandemic, prompting auto suppliers to cut their orders for the computer chips that manage everything from a car’s brakes and steering to its electric windows and distance sensors.

>But demand for cars jumped unexpectedly in the final three months of 2020, as buyers became more optimistic. Audi had its best quarter ever, largely because of a rebound in China.

You say that development of the chips in cars is extremely complex, but I was under the impression car chips are generally outdated, semi-rugged processors that might have some additional safety features like lockstep cores. The control systems algorithms for the functions you describe aren't particularly complicated as far as I know.

Auto manufacturers are infamous for cost cutting. I assume selling them chips is a low margin high volume business, in which case I would be glad to replace their orders with higher margin ones at the earliest opportunity.

[0] https://on.ft.com/39V7w9h (paywalled after 3 free accesses)

(if anyone wants to read the article but can't, feel free to comment and I'll reply with a new link)

Exactly.

Most of the Chips in Cars are on 28nm if not older. And 28nm Fab Demand has been outstripping supply for quite a while. So 28nm products are getting much more expensive and some customers simply refuse to accept the new price. And when they do, Vendors said it is too late, orders are already taken.

And they just love to blame it on TSMC.

>Did you know that a single vehicle uses from 30 to over 100 chips

trying to sell extended warranty the dealer made sure to repeat that again and again ( i still didn't buy and as of now, 5.5 years later, no chip nor anything else has failed so far :)

Reminds me of the time a dealer tried to convince me with "math" that I was guaranteed to save money by buying the extended warranty. I asked if that meant they were guaranteed to lose money, and if so, why they were trying so hard to sell it to me. They moved on pretty quick from that.

It’s really a kind of insurance, and like insurance it’s a gamble. On average dealerships must win, or they would’t offer it, but that’s not to say that some customers don’t “win” if they got unlucky with their car.

That being said, I opted out of it with my last car.

I did buy an extended warranty for one car, never had a warranty claim until it broke down with only about three or four months left on the warranty. That one paid off.

In another car (same mfr) I looked into getting one when the regular warranty was about to run out. Sales guy looked and said: main thing that happens to these older cars is X and Y and you already replaced X so it's not worth it. I always wondered if what he really meant was "main thing that happens is something expensive and I'd rather get paid retail to fix that". Either way I skipped it and never had a problem.

I do consider it insurance.

Maybe he was just being honest!

An employee of a car dealership? Impossible!

The guys car was out of warranty. Be nice and maybe he'll buy his next car from you. Makes some sense.

To be fair to the dealer, it might still make sense for him to sell you the warranty even if they would be likely to lose money on average. For starters the salesman himself gets commission on selling the warranty, but he might not get anything on service and repair. Also warranties are cash in hand that you can amortise over the warranty period, so it's effectively a steady revenue stream rather than bursty fits and starts. That enables more efficient financial planning.

I used to work at an automotive electronics supplier back in the 1990s. The “typical” mainstream car crossed the 30-chip over 20 years ago. It would have had more than 10 in the early 1980s.

Most of this stuff is extremely reliable!

>> Most of this stuff is extremely reliable!

Automotive grade chips are probably second only to aerospace parts.

I think I remember reading that auto parts included in the original vehicle have a minimum designed life of 10 years.. that includes the radio and related display components

Chip fabs are one of the most capital-intensive and brainpower-intensive industries that there are. At the same time it is motivated by tight margins. A short term supply shortage is not going to motivate carmakers to enter this entirely different market. It might happen on a national or supranational level though.

I don't really believe that such thing as a shortage exists in a free-market economy. Executives who complain of shortages are just way too rigid with their planning and are not willing to pay the increased price. Exactly this goes for VW.

I don't think that is right in the short term, which is the time horizon the article discusses. Eventually, baring an actual physical resource constraint, the market will take care of it but in the short term something will have to give.

Your faith in free markets may be a bit misplaced. There's a long history of semiconductor shortages followed by markets being flooded due to lack of demand predictability and the capital costs and lag time of scaling manufacturing. DRAM manufacturers have several times illegally colluded to avoid these circumstances (and thus maintain profit margin).

Structural barriers are 'real things' even in free market economies. The size, complexity, barriers to entry, massive government subsidies, geopolitics are all part of the equation at that level. If this was about 'wheat' or 'shoes' then yes, but at this level the equation is different.

Also, these execs are not dumb, if they could just 'adjust their price and sell 100K more cars' ... well, they've thought of that.

Probably what needs to happen is Merkel, Bojo, EU leadership (and same in other countries) might need to pipe in with something to facilitate the economy, but that's also fraught with risks, it's not like Norway Statoil whereby they just have to 'get the Oil from under the sea and it's bank'.

Car makers are big, but to a chip maker they are a tiny customer. I suspect more than one car maker has considered making their own fab, but the costs are just too high. (My company has in fact done that, we didn't open a fab last year because of the costs - I'm not sure that was the right decision given the costs we have spent porting working software to the replacement instead, and we have a fraction of the volume of the big auto makers)

Manufacturing is a core competency of any car maker (second to supply chain). I wouldn't be surprised to see a fab partner ship between automakers in the future just to ensure they can get the chips they need. This will be at least as much about ensuring old chips don't go obsolete as about supply.

Opening own fab probably does not make sense for passenger cars. It may be reasonable for high volume long lifetime speciality vehicle producers (John Deere, etc). That will not be 'a 3nm fab', however.

Auto companies cut the orders because they anticipated falling demand[0]

>Mr Duesmann described the problems as “a crisis upon a crisis”. Demand for cars slumped for much of last year because of the coronavirus pandemic, prompting auto suppliers to cut their orders for the computer chips that manage everything from a car’s brakes and steering to its electric windows and distance sensors.

>But demand for cars jumped unexpectedly in the final three months of 2020, as buyers became more optimistic. Audi had its best quarter ever, largely because of a rebound in China.

[0] https://on.ft.com/39V7w9h (paywalled after 3 free accesses)

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