Amidst reports of semiconductor inventories building in the supply chain, the automotive industry remains hampered by the chip shortage. Carmakers’ demand for electronics continues to skyrocket, according to McKinsey & Co., but the auto industry’s reliance on 90 nanometer chips will keep supply and demand out of balance for some time.
Most future automotive-wafer demand will involve nodes of 90 nm and above because many vehicle controllers and electric powertrains, including electric drive inverters and actuators, rely on these mature chips, McKinsey reported. Such nodes will account for about 67 percent of automotive demand in 2030.
Semiconductor companies are increasing production of 90 nm chips, “but our analysis suggests that the CAGR will remain at only 5 percent or so from 2021 through 2026—not enough to eliminate the supply – demand mismatch,” the firm added.
Here’s McKinsey’s analysis by the numbers:
OEMs that rely on 90 nm chips for many applications have little incentive to migrate to smaller nodes because redesign incurs development and qualification costs, as well as more R&D staff, McKinsey explained.
The lifespan of a car significantly exceeds that of a consumer product, so the electronics specs in vehicles aren’t easily upgraded when technology advances. Additionally, consumer companies use many of the same chips car makers are vying for and order them in much higher volumes. Since automakers are no longer chip makers’ most influential customers, they’ve lost clout when negotiating for preferential treatment, one analyst told EPSNews. Car makers have also developed a reputation for ordering components far in advance and cancelling orders at the last minute. This has exacerbated the impact of the global chip shortage on the automotive industry.
The disadvantages of using more advanced chips in vehicles often outweigh the technological benefits, McKinsey explained. Since drive inverters and actuators require high voltages and currents, chips used in these applications don’t benefit from the high transistor density characteristic of smaller node sizes.
“Of course, OEMs do sometimes need leading-edge chips—for instance, to enhance autonomous-driving systems significantly,” the firm added. “These chips have higher CAGRs [about 9 percent from 2021 through 2026] than mature nodes do. But OEMs may still have trouble obtaining sufficient quantities because cross-industry competition is intense. The supply – demand mismatch will therefore persist across all node sizes.”
For the past two years, McKinsey and other consultants have advised automotive OEMs to create better technology road maps and improve short- and long-term demand planning to stave off another industry-specific chip shortage. There’s also a need for better cross-industry collaboration along the automotive supply chain. McKinsey recommends:
There are indications auto makers are taking this advice to heart:
While the supply chain collaboration is significant, co-development agreements tend to look forward rather than back. Carmakers could be eyeing a transition toward more advanced semiconductor technology.
Barb Jorgensen is editor-in-chief for supply chain publication EPSNews and has covered electronics manufacturing, procurement and business for more than 25 years. Barb spent most of her career with Electronic Business magazine and EBN; freelanced; and then founded online publication EPSNews with two industry veterans—Bolaji Ojo and Gina Roos. EPSNews was acquired by AspenCore in 2017.
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