The global chip shortage is set to ignite a power struggle between chip makers and their customers as to how the industry’s supply chain works and who pays for the cost of carrying inventory.
In an interview with the Financial Times, CEO, one of Europe’s largest chip makers, said customers need to accept that their dreams are over.
“If they are expecting semiconductors [suppliers] Jean-Marc Chéry, CEO of STMicroelectronics, said:
Relationships with some of the largest suppliers of chips from companies like STMicroelectronics were “unbalanced in the past,” Chéry said, overstocking to drive the industry’s just-in-time supply chain. I was forced to hold it.
When the worst shortage is over — Chery expects to happen by the end of the year — he said it will be time to discuss the “lessons” of the crisis. His company boosted profits in the first quarter significantly due to a shortage.
Chery, whether it’s an automaker or its supplier, wants to keep more inventories or agree to more non-cancellable contracts to make supply more predictable and reduce the risk of shortages. We are asking our customers. Europe’s largest chip maker, Infineon, A similar warning was issued in March, stating that car companies need a “different model” to procure chips.
The chip shortage was due to an unexpected recovery in demand for automobiles at the same time as the rapid growth of the consumer electronics market.
According to IHS Markit, a shortage of automakers around the world required production to be idled or relocated, cutting production of up to 1.3 million cars in the first quarter. Correspondingly, chip makers are increasing their investment in capacity, but they are also demanding structural changes in their supply chains.
The highly capital-intensive semiconductor industry has a long production lead time, accounting for about 10% of its business with the automotive sector. For STMicroelectronics, that’s close to 30%, Chéry said.
Ford CEO Jim Farley said Wednesday urging investors to rethink how a chip shortage would guarantee the company a supply of key components in the future.
“As CEO myself, I talked to many colleagues in other industries, and even if the company is still buying components, how common buffer inventory is and how it is bought directly with the foundry. It was very interesting to know if it was a chip from a supplier, “he said. “Everything is on the table,” he added.
Chip shortages can also encourage renegotiation of the automotive supply chain as to who will bear the cost of carrying more inventories of prices, purchases, and critical parts, Baird analyst Luke said. Junk said.
“The depth of pain the industry is feeling right now is certainly the catalyst for conversation,” he said. “I don’t think we can conclude at this point who intends to win the tug of war.”
The supplier between the car and chip makers will be at the center of the battle. “The complexity of many different parts and chips is so high that we can’t imagine an automaker sourcing directly from a chip maker in the future,” said a representative of a so-called Tier 1 supplier in Germany.
“The new deal requires automakers to promise more binding order volumes to catch up with Apple and Co, which has been doing this for a long time.”
But in March Valeo CEO Jacques Aschenbroich, a French Tier 1 parts supplier, defended the existing model and said it was unwise to dispose of it after a single crisis. .. .. Does it need to question the entire supply chain? I do not think so. “
Chipmaker says shortages will lead to supply chain power struggle Source link Chipmaker says shortages will lead to supply chain power struggle