Ford announces partnership to ensure steady flow of US-made chips

With increasingly sophisticated cars consuming more and more computing power, a shortage of semiconductors has vexed automakers and disrupted production around the world.

Ford Motor moved on Thursday to meet that challenge, announcing a partnership that could give the company greater control over both the delivery and design of its chips — the brains needed to power engines, transmissions, brakes, infotainment systems and more. to guide.

Ford said in a statement that it had signed a non-binding agreement with US-based semiconductor supplier GlobalFoundries to collaborate on developing chips for Ford vehicles, and that the companies would explore expanding domestic chip production. .

Chuck Gray, Ford’s vice president for embedded software and vehicle control, said that even with the new partnership, the automaker expected chip supply to remain uneven for some time to come. “We still think there will be fits and starts next year,” he said.

But he added that the partnership with GlobalFoundries should allow Ford to lend a hand in designing some of its own computer chips.

Until recently, many car parts could be easily controlled by generic computer chips. But that is no longer the case as manufacturers add increasingly complex features such as battery monitoring, advanced driver assistance systems and network services.

“Computing power is the new power,” said Mr. Gray. “The demand for computing power is so great right now and we need to have the right chips to do the right things.”

In recent years, American automakers have hired thousands of software developers and programmers. Mr Gray said Ford now wanted to attract chip designers as well. “We will build on that in the near future,” he said.

General Motors is also taking steps to gain more control over the development and availability of chips. GM’s president, Mark Reuss, said on Thursday that the company expects the number of semiconductors used in vehicles to double in the coming years. As a result, he said, GM is working with chip companies to develop three types of microprocessors to meet nearly all of its computing needs.

The measures are part of a strategy to reduce the number of varieties of chips by 95 percent and should help increase the supply of chips while significantly reducing costs, said Mr. Reuss at an automotive technology conference held by Barclays, the investment bank.

“With this, we are going to lead the industry,” he said. “And this will drive quality and predictability.”

To secure a supply of new chips made with an energy-efficient material called silicon carbide, GM reached a deal last month with Wolfspeed, a company formerly called Cree that is building a plant in upstate New York.

Mr. Reuss said GM was in talks with many major suppliers to get enough chips to keep its factories running. Due to the shortage of chips and the ongoing production stoppages at car factories, car dealers have a tight supply of new vehicles on their lots.

Both Ford and GM reported new-vehicle sales in the United States fell by about a third in the three-month period ending in September, hurting their revenues.

Mike Hogan, senior vice president of GlobalFoundries responsible for its automotive business, said talks with Ford focused primarily on securing key chips for current car production. But the talks expanded and touched other areas, including getting Ford early input into chip manufacturing processes that could shape features such as the range of electric vehicles.

“Traditionally, there were a lot of players between us and someone like Ford,” said Mr. Hogan. The automaker’s move to get more involved in shaping chip technology “is a great example of the kind of changes you’re going to see,” he said.

The other issue is where future parts will be made. Most advanced chips are produced by Taiwan Semiconductor Manufacturing Company, which is by far the largest chip manufacturer or foundry. But interruptions in shipments from Asia caused by the pandemic have left politicians concerned about reliance on factories in Taiwan, especially in view of China’s territorial claims to the island.

So the Senate has approved an overwhelming $52 billion package of grants to encourage the construction of more chip factories in the United States, even though that funding has been mired in partisan battles in the House.

GlobalFoundries was formed in part through acquisitions of factories previously owned by chipmaker Advanced Micro Devices, also known as AMD, and IBM. It had an initial public offering of shares in October and is investing heavily to expand its output.

Though 89 percent owned by the government of Abu Dhabi, GlobalFoundries makes classified chips for the Pentagon at plants in Vermont and upstate New York. It has a high-volume plant near Albany, NY, whose production it aims to double, hopefully using grants from the Congressional funding package if approved, Mr. Hogan said.

Making chips in America, he said, was certainly part of the Ford relationship. “There’s one aspect that says, ‘As we reinvent how we source semiconductors, let’s solve another problem by having more of them onshore.'”

The $500 billion semiconductor industry supply chain is extremely complex, especially for chips used in cars. Major suppliers include NXP Semiconductors and STMicroelectronics in Europe, Renesas Electronics in Japan and Onsemi and Microchip Technology in the United States. Those companies have factories to make some chips that they design, but they also outsource some of the manufacturing.

Automakers have traditionally relied on an additional intermediate group of so-called Tier 1 companies that buy chips to design modules to perform certain functions in cars, such as driving engines and transmissions.

Handel Jones, head of chip consultancy International Business Strategies, says he has advised automakers to follow a page of fast-moving Silicon Valley companies like Apple, which designs some of its key chips and consults other companies on both design and manufacturing. .

“They will be going to the foundry suppliers to make sure the capacity is protected,” Mr Jones said in a recent interview.

Ford and GlobalFoundries said they planned to continue discussions on specific ways to increase chip output in the United States. They declined to elaborate or say whether Ford could invest in a new semiconductor plant with GlobalFoundries.

Thomas Caulfield, the chief executive of GlobalFoundries, said the agreement would foster innovation and “balance supply and demand over the long term.”

The chip shortage in the car industry stems from the start of the pandemic, when car factories were closed for about two months to prevent the spread of the coronavirus among workers. At the same time, sales of computers and game consoles soared and technology companies expanded orders for semiconductors. When automakers resumed production, chip suppliers had little capacity available to them.

Ford was hit particularly hard earlier this year after a fire shut down a chip factory belonging to one of its major suppliers. In the second quarter, it was only able to make about half as many vehicles as it originally expected, although its chip offering has steadily improved since then.

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