US Ford, GlobalFoundries to collaborate on chip production; global shortage to stretch into 2022
HOUSTON (ICIS)–US automaker Ford and semiconductor manufacturer GlobalFoundries announced on Thursday a deal to improve microchip supply, but the global shortage that has dented auto production and sales is still expected to stretch well into next year.
The agreement will allow the companies to work together to “build and strengthen a collaborative model to accelerate the next wave of innovation in automotive chip design”, they said in a joint release.
Under the agreement, GlobalFoundries will create additional semiconductor supply for Ford’s current vehicle offerings and the companies will explore expanded chip manufacturing opportunities to support the overall industry.
This strategic collaboration does not involve cross-ownership between the two companies, they said.
Microchips are used to control the engine, antilock brakes, power steering, fuel-monitoring system and heating and air conditioning in modern vehicles.
The global shortage of semiconductors arose as economies began reopening after lockdown measures to help stop the spread of the coronavirus, and chip producers were unable to keep up with the spike in demand.
The chip shortage, which is likely to last into 2022 despite today’s announcement, has had a drastic impact on auto production and led to reduced inventories on dealer lots and reduced sales of new light vehicles.
The automotive industry is a major global consumer of petrochemicals which contributes more than a third of the raw material costs of an average vehicle, and production disruptions could severely weigh on demand.
The automotive sector drives demand for chemicals such as polypropylene (PP), along with nylon, polystyrene (PS), styrene butadiene rubber (SBR), polyurethanes and methyl methacrylate (MMA)/polymethyl methacrylate (PMMA).
Under the non-binding agreement, the companies will also work together on things like semiconductor solutions for advanced driver-assistance systems (ADAS), battery management systems and in-vehicle networking for an automated, connected and electrified future.
“It’s critical that we create new ways of working with suppliers to give Ford – and America – greater independence in delivering the technologies and features our customers will most value in the future,” said Jim Farley, Ford president and CEO. “This agreement is just the beginning and a key part of our plan to vertically integrate key technologies and capabilities that will differentiate Ford far into the future.”
“Our agreement with Ford is a key step forward in strengthening our cooperation and partnership with automakers to spur innovation, bring new features to market faster and ensure long-term, supply-demand balance,” said GlobalFoundries CEO Tom Caulfield.
The global auto industry continues to struggle to make up for pandemic-induced losses, with Q3 production down by 13.2% year on year, according to ICIS demand analyst Jincy Varghese.
Varghese cited a prediction from Oxford Economics that Q4 will be down by 6.5% compared with Q4 2019.
“Global vehicle production growth is not expected to return until Q3 2022, with chip supply expected to remain tight through 2022,” Varghese said.
Varghese noted that chipmakers tend to prefer consumer electronics over cars because of higher volumes and better margins and that the auto industry’s just-in-time (JIT) procurement strategy adds to the pressure.
“However, it is not all doom and gloom as vehicle chip suppliers such as Infineon and Bosch are ramping up capacity,” Varghese said. “Many countries are also now looking at chips as a strategic material and the industry is now receiving government support.”
Focus article by Adam Yanelli
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