Bosch, Europe’s largest auto supplier, has warned car manufacturers that they must put “money on the table” and make a “rock solid” commitment to orders if they are to avoid a repeat of the chip shortage bedevilling the industry.
“The only way to get out of [the recent crisis] is to have a different level of commitment,” Harald Krüger, a board member at the privately owned German group, told the Financial Times.
Automakers can no longer make last-minute decisions based on fluctuations in demand, said Krüger, pointing to the long lead times in chip production and increasing demand for the semiconductors.
Modern cars use dozens of chips to power everything from parking sensors to entertainment hubs, to engine control systems.
“Money needs to be put on the table and actually parts have to be bought,” Krüger said. “The commitment needs to be rock solid that those parts will be bought. It can’t be: ‘Maybe I [will] buy them, prepare for it, and maybe not.’ This doesn’t work.”
Carmakers have been forced to scale back production after a robust rebound in sales this year caught them flat-footed and battling against the consumer electronics industry for a limited supply of chips.
The industry is expected to produce at least 1m fewer cars than initially forecast this year, with several companies, including Bosch, warning that shortages will continue into 2022.
The deepening crisis has already prompted some to consider radical measures. Last month, the FT reported that Tesla was about to take the unusual step of paying for chips in advance while also exploring buying a semiconductor plant.
The bosses of Mercedes-Benz maker Daimler and Volkswagen’s Porsche told the FT earlier this year that their companies were considering building up stockpiles of the crucial components, in a departure from the industry’s decades-old “just-in-time” procurement system.
Krüger’s intervention came as Bosch on Monday opened a new semiconductor factory in the east German city of Dresden, which will produce chips on 300mm wafers.
The €1bn plant is the largest investment in the company’s history, and the vast majority of semiconductors made there will end up inside Bosch’s own automotive parts.
“By doing our own stuff we can ease some pain in the system,” Krüger said, although he added that the ramp up “will take some time”.
The decision to build the new plant was made four years ago, and Krüger said that Bosch’s direct competitors would find it hard to belatedly follow suit.
“It is mission impossible to enter now into the game,” he said. “It would be so much effort, and too much time needed to get something meaningful out of [the investment].”
Bosch is the latest group to invest in a part of Germany dubbed “Silicon Saxony”, an area being eyed by policymakers as a solution to Europe’s over-reliance on Asian suppliers of semiconductors. Chipmakers GlobalFoundries, Infineon, and X-Fab have all invested in the region.
The EU has earmarked a portion of its €750bn Covid-19 recovery fund to strengthen Europe’s semiconductor design and manufacturing capabilities.
For its new factory, Bosch received €140m in European subsidies. “It’s a very smart investment,” Krüger, a former Tesla board member, said of government funding for European plants. “It paid off big time for some of those Asian countries, and it will pay off big time for the western economies.”