The Week in Mobility — 21 May 2021

The Chips are Down

When auto plants temporarily closed due to the pandemic last year, semiconductor manufacturers switched production from automotive grade processors, to more profitable consumer electronic processors that power the “internet of things”. The auto industry has since recovered faster than expected, but chip manufacturers have been slow to switch production back. This has created an almighty supply and demand debacle (worsened by a recent fire at a plant in Tokyo) that has left many automotive manufacturers in an almighty pickle.

According to AlixPartners, lead times and production should return to normal by Q4 2021 but not before costing automakers $110 billion in revenue and 3.9 million lost vehicles. Vehicles can contain up to 1,400 chips which power everything from infotainment to more basic functions such as power steering and brakes. The more sophisticated and connected the vehicle’s features, the more chips, meaning high end marques are feeling the shortage most acutely. In April, Jaguar Land Rover, Mini, Stellantis, GM, Ford and Nissan all suspended production, whilst many other vehicle manufacturers are replacing digital features with an analogue alternative.

China, Taiwan and South Korea manufacture 87% of the world’s chips. The Taiwanese government in particular has spent decades investing in the entire semiconductor ecosystem making it difficult for other countries to see an adequate return within a reasonable time frame on the $10 billion required to build a fabrication facility. The automotive industry has well and truly exposed its achilles heel — a $70,000 car held up by $50 of chips. Biden recently announced $50bn for chip research and manufacture as part of the jobs plan (imaginatively called CHIPS Act) a move which should be regarded as long term gruelling physiotherapy rather than a band aid to fix this particular achilles heel.

Toyota, however, has experienced the shortage as at worst, a minor inconvenience. Following the 2011 Tohaku earthquake that triggered a Tsunami in Japan, Toyota identified the 1,500 most vulnerable components that it deemed necessary to stockpile. Since then, this list is closely monitored, inventory carefully stockpiled and suppliers diversified.

Stockpiling is at odds with every Just in Time principle in the book and, as Toilet Paper Gate 2020 showed us, a sure way to drive panic and exacerbate shortages. Stockpiling works if you’re the only one doing it, however diversity (both in geography and supplier) is needed for all automotive players to survive.

It is crazy to think that a single component can bring big behemoth OEMs to a standstill. In our everyday lives we sometimes experience the temporary digital paralysis of a dead phone battery that renders you momentarily directionless and/or penniless. As more things get ‘smarter’ it allows us to dematerialise and streamline our possessions. Keys — phone — wallet departure checks can already be a phone (and facemask) check and, one day embedded devices might forgo the need to check altogether. With increased connectivity comes greater, more concentrated vulnerability that OEMs have shown via this semiconductor cautionary tale.

Elsewhere in the industry

• Onto Car subscription service orders 700 Fisker SUVs — electrive
• SAE updates autonomous driving level descriptions — Car and Driver
• Revel is launching a ride hailing service with 50 Teslas in NYC — TechCrunch
• This mini EV is outselling Tesla in China — Quartz
• Oxford Energy Hub is underway — Current News
• London’s scooter trial will kick off on 7th June — The Verge
• Cities in the US are exploring free fares for public transit — Washington Post
• India announces hypercharger network for electric two wheelers — Green Car Congress
• The International Energy Agency has proposed a roadmap to reach net zero by 2050 — IEA
• Elon + Crypto = Sigh — The Independent
• Michelin is developing sustainable tyres — Michelin
• Cruise introduces “Cruise for Good” — Medium
• All the EVs that stood out at the Shanghai Auto Show — TechCrunch
• Tokyo is getting an e-sports gym — kotaku

Miscellaneous

This week Google revealed Project Starline — a video call that allows the users to see each other in 3D. The technology makes a video call feel somewhere in between someone sitting across from you at the kitchen table and visiting someone in prison separated by a glass pane. The last year has shown how we can well and truly shrink the globe by conducting business and relationships remotely and across multiple time zones. However it has also made clear the very human need for connection. Tools like Starline could be a sure way to make remote work that little bit more tenable.

Have a wonderful weekend!