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Discussion Starter · #1 ·
Electronic components especially microprocessors are manufactured in very large numbers. The initial investments are large while the actual components are relatively cheap to make. You spend some $$$ to setup your R&D, manufacturing process etc and start shelling out your products. It means that there cannot be “chip shortage” . You either have full absence of a particular component or full availability.
Since some of lets say MDX 2022 are still produced that means the components are there. I cannot imagine a situation where a manufacturer had only 100,000 of special microprocessors. That makes no sense. So why so few cars on rhe market?
 

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2022 MDX Aspec / 2019 Ridgeline Sport / 2007 335i Coupe
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Supposedly the car manufacturers cancelled their orders and were put at the back of the line. Some articles and YouTube videos said something to the effect of Apple and other phone manufacturers were put to the front of the line.

I don’t really buy it. But Tesla supposedly saw it coming , whether they had inside information or not, and made their own chips to keep the electric car lines going.

As for all other gas cars, we have to “fight” for prices and inventory even though I pass by dealerships and see some of them full. Yeah I drove to another city (San Marcos up to Austin) and saw many dealers bare bones as well.

Some videos said some vehicles needed a module for infotainment . If the base models were being made, I’d expect they wouldn’t need as many. By what I’ve seen at my local dealer is they aren’t ordering any base models and instead only Aspec or Advanced. They are maximizing profits because for every chip needed they want to get the most out of the sale as they wait. One weekend they had two trucks drop off around 15-20 Aspec RDXs . That was the most I’ve seem ever sitting on a lot and every one of them sold over 2 weeks.
 

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I think you got it all wrong.

There absolutely can be chip shortage. That's exactly what we are experiencing right now.

First of all, it's not only about micro processors. The amount of chips we are using in our daily life devices is huge. PCs, gaming consoles, smartphones, tablets, cars, toys, TVs, monitors, cameras, and many many more - the list is endless.

1) Covid-19 lockdowns have shifted a substantial amount of workforce to work from home wherever possible (I myself am one of the lucky ones that fall under that category). This has driven up the demand for personal computers like the world has never seen before.

2) The vast majority of various chips outside of Intel (which procuces most of their own) is mostly split in between TSMC and Samsung (the biggest chip foundries), which have to accommodate most of world's biggest consumer electronics: Apple, nVidia, AMD, etc.

3) On top of that the crypto mining boom of 2020-2021 has added a significant production allocation shortage (and there's only limited amount of allocation possible). Particularly 3000 series nVidia GPUs are in demand so high, scalper prices double and even triple in some cases the MSRP.

BTW, this is not going to end any time soon. Even though they are building new facilities, it might take up to a decade to catch up with the demand to any meaningful extent.
 

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I've designed circuits and the component selection area is one to pay close attention to and the particular component selection has its pros and cons.

On the one hand, it's ideal to never design with a chip that doesn't have multiple sources since one source could decide to no longer make that chip, could go out of business, could have a factory disaster that causes them to not be able to deliver, has other customers one must compete with, etc.

On the other hand there are economies to be taken advantage of with certain custom components such as designing ASICs and other customized circuits that can integrate much of the circuit into fewer components. This ends up with circuit boards that require less real estate, use less power, have a cleaner design, and generally are less expensive at scale. You can see how these attributes can be advantageous in the application of a vehicle where space and power are at a premium. The problem with these circuits is that there may be only a single supplier, or if multiple suppliers, since they're custom there will be some setup and scheduling time in order to actually have them made and again, one is competing against other customers with this.

A car no doubt has a combination of both of the above design practices.

Another factor is 'just in time' manufacturing and logistics. It costs a lot of money to buy a huge number of components at once and then have them sitting around waiting to use and potentially to be a waste when it's later discovered they won't be used because the applications (vehicles) they're used in didn't sell in the numbers expected or, with chips, a design flaw was discovered necessitating a revision - and now what to do with the large number still sitting on the shelf.

The manufacturers themselves are facing potential geo-political aspects (ex: embargoes against certain countries, increased import tariffs, and the like), competition from other manufacturers, delivering to competing customers (allocate that next run to Ford, or Toyota, or Honda, etc.) and other issues that can hit their ability to manufacture like when the Tsunami hit Japan.

The designers of the circuits need to pay attention to all the above factors and source wisely, which includes multiple manufacturers for the same components, appropriate lead times, geo-political considerations (like not sourcing solely from China), and the other factors.

Of course, Covid hit the world and caused major disruptions in the entire supply chain and even the behavior of the marketplace - ex: all of a sudden many people are working remotely hence they want to buy new laptops, new wireless routers, different kinds of vehicles, etc.
 

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One factor that has not been mentioned is that car manufacturers use old technology chips that were only produced in a few factories. These factories were hard hit by covid and could not produce chips. They are still not able to produce enough.
 

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One more item w I th respect to the chip shortage is that dealers are more profitable than ever....they have lowered costs....ie headcount and interest in addition to higher profits per vehicle sold as a result of lack of discounts....
 

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One factor that has not been mentioned is that car manufacturers use old technology chips that were only produced in a few factories. These factories were hard hit by covid and could not produce chips. They are still not able to produce enough.
I have read a lot of articles and this is certainly part of the issue. With a car, it isn't easy to just call up TSMC and ask them to build you a new willywacker module on some extra wafer space (if they had any extra space). Many of the auto chips are using old tech....larger process nodes....like "so 2010 or 2015" if you will.....because it never really mattered. You just need a chip that does XYZ, pretty simple. You don't care if that new chip is 100X faster than 2 years ago to render the newest Madden 22 game on PS5, and you don't care if that new chip is 2X smaller than the last one or uses 21% less power because you want your mobile phone to last. ALSO you need that chip or at least the module to be approved in the regulations and safety etc, so you can't just swap it out with a new design tomorrow. These chips are also "cheap" and probably pretty low profit too, vs that newest Ryzen 5950X that is the size of your thumbnail and costs $700 or whatever. SOOOOOO the manufacturers of these auto chips certainly haven't been pouring tens of billions of dollars to build new fab plants that use 5 or 7 year old technology to make sure they can churn out enough chips that cost $2.27 or whatever it is they cost......

Now I would also suspect that when all the auto mfrs got short on these, they are all scrambling too and probably over-ordering. So the existing capacity is trying to make as many chips as it can but it can't satisfy all the companies demanding as many chips as they could get their hands on. So like people hoarding toilet paper....there are shortages

Lastly, I do suspect there is some hoarding of chips in the system somewhere. Also, I do think these auto companies are a bit like HOLY SH&T YOU MEAN WE CAN SELL EVERY CAR WE MAKE AT NO DISCOUNT AT ALL, IF WE JUST RESTRICT PRODUCTION???? and so they are probably trying to figure out how to ramp production somewhat but not so much that they ruin this supply/demand imbalance that is clearly favoring the seller right now.

Still SUX for us!
 

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Discussion Starter · #9 ·
Also, I do think these auto companies are a bit like HOLY SH&T YOU MEAN WE CAN SELL EVERY CAR WE MAKE AT NO DISCOUNT AT ALL, IF WE JUST RESTRICT PRODUCTION???? and so they are probably trying to figure out how to ramp production somewhat but not so much that they ruin this supply/demand imbalance that is clearly favoring the seller right now.

Still SUX for us!
That would require (criminal) agreement between different manufacturers and assume that lets say Toyota would not break the agreement and flood the market with their cars while Honda and others are enjoying low output/high price situation.
 

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Car manufacturers aren't using the smallest nodes from TSMC or samsung. They use asic chips often from China. When they stopped selling cars, those factories closed. Often those factories only had a few customers due to the custom nature. They closed and then suddenly car companies need their chips again with no one to produce their custom chips because the supplier went out of business.

It is cheaper to have 50 different cheap computer modules per car then 1 main module and try to integrate it through 1 powerful chip. Tesla integrates more through fewer powerful chips than most companies and they also do everything in house but rely on global foundries to make the actual chip.

Soon there will be plenty of chips as China comes more online. Building state of the art smallest node chips used for graphics cards or cpus is really expensive and these chips aren't going in cars. JIT manufacturing is very cost friendly as long as all parts of the supply chain aren't disrupted.
 

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That would require (criminal) agreement between different manufacturers and assume that lets say Toyota would not break the agreement and flood the market with their cars while Honda and others are enjoying low output/high price situation.
I'm not saying criminal. But certainly mfrs are seeing that there is lots more pricing power on the order and produce model vs produce a crapload and flood the dealer lots with product and then discount to move inventory model. The Tesla model vs the traditional model.

Right now though I'm sure they would like to sell more units if they could even at a slight discount
 

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Discussion Starter · #12 ·
I am not sure if it is the manufacturer that rips all the profits. My understanding that dealers pay a set invoice price and take it from there. So having inventory shortage is eary profitable to the dealers as long as they can get some cars.
 

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I am not sure if it is the manufacturer that rips all the profits. My understanding that dealers pay a set invoice price and take it from there. So having inventory shortage is eary profitable to the dealers as long as they can get some cars.
I was chatting with a buddy who is the finance manager of a Toyota dealership.

While profit margin is high per car, the sales volume does not meet the minimum profit goal to break even -overal revenue is down- in order to be sustainable for business in the long run. Even after laying off sales people, there are plenty of fixed cost associated with operating a dealership that can not be covered by the record high profit per car, can not be reduced by cutting off expense on the variable cost, plus who want to own a multi million dollar business that just break even -let say the record high profit is reinvested to cover that fixed cost shortfall ?

Also, he is worried about used cars market to come. A few yrs from now, there will be shortage of good quality certified used cars due to new car shortage that is happening now. What he is saying is, get that new car at MSRP now and when you trade it in, likely it will also get top dollar a few yrs from now ( 1 to 3ish) even after chip shortage will be no longer an issue at that future time.
 

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There is a chip shortage because over the years plants have closed down because of the saturation in the market. Now because of the huge spike in sales, inventory being depleted, plants having to shut down for a few weeks at a time because of outbreaks and laws, there is a huge swing now. Thus companies like TMSC are starting to build more plants now and restarting others that were shut down. Understand there are only a handful of suppliers out there, these plants cost BILLIONS to make. The last TMSC/Apple plant is supposedly to cost $12 billion and that was before the recent inflation.
 

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Discussion Starter · #15 ·
Those who commute by bicycle also were hit by this “chip shortage”. Even though a mschanical bicycle does not use a single chip it is hardly possible to buy a good new bike for a reasonable price. But if you want to sell used they give you a very good money. Same as with cars.
 

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Cars (along with appliances and most things you buy today) today have a few higher tech IC's, and a huge number of "jelly bean" IC's. Those "jelly bean" parts that are very low cost, been around for a long time, and not a lot invested in the mfg side due to the low margins. Add to that almost all of the "passive" components, resistors, capacitors, inductors etc. are also no long the old leaded type devices but very very small leadless devices. Often referred to as 0204, that is 2mm x 4mm in dimensions. some as large as 0608 6mm x 8 mm. Again these take IC like mfg processes. Lead times on the active devices even if you have massive extra capacity is still long, 8-12 weeks to complete the devices through the process once started is not uncommon. And seldom is there much of any extra capacity given the cost to build a plant and the fixed cost to keep it running.

The car mfg IMHO are someone "late to the game" of mfg with semiconductor devices in the products and hadn't experienced what happens with you cancel/change orders with a IC mfg. Having been in the electronics test equipment mfg business for decades, I can say decades ago our company learned how to react to market cycles and new the implications of what happens during market cycles with leadtimes. Couple the car mfg inexperience with something with global implications and it has been a learning experience for them I'm sure.

IMHO the issues on shortages today are split between poor planning by the end user given the impacts of COVID and supply chain implications, and capacity constraints again due to COVID on worker availability, worker safety and the supplies they need. IC's start with growing these huge (10+ inch diameter) long silicon crystal boles that then need to be cut, polished etc. and then sent off to the IC mfg. And then to increase capacity they need not only the buildings, but the equipment which is also full of state of the art electronics to do the processing.
 

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Amazing. All of these responses and no mention of one of the primary causes of chip shortages in the automotive sector: a fire in a semiconductor factory that specialized in automotive ICs. See Factory blaze adds to computer chip supply crisis . It has also been well documented that another of the main causes is that the auto companies cut back on orders when the pandemic first hit sales and were slow to get back into the market, thus losing their place in line. Semiconductor manufacturing is not a uniform, interchangeable market; ICs are designed for specific processes with specific vendors and usually require some re-engineering to manufacture elsewhere. It is a mess...
 

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All of these responses and no mention of one of the primary causes of chip shortages in the automotive sector: a fire in a semiconductor factory that specialized in automotive ICs.
I sort of had it covered with -
...could have a factory disaster...
Any glitch in the JIT supply chain, such as a supply impact from a factory fire, or factories shut down due to an earthquake, Tsunami, Covid, and the like, stresses the availability more and they're cumulative.
 

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I sort of had it covered with -


Any glitch in the JIT supply chain, such as a supply impact from a factory fire, or factories shut down due to an earthquake, Tsunami, Covid, and the like, stresses the availability more and they're cumulative.
And for a low-tech analogy to this, consider a the recent SINGLE chlorine plant fire/disaster. Pool owners everywhere either could not GET chlorine or had to pay 2 to 3X for tablets, granules, shock, etc. Most online vendors couldn't even offer product.
 

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Cars (along with appliances and most things you buy today) today have a few higher tech IC's, and a huge number of "jelly bean" IC's. Those "jelly bean" parts that are very low cost, been around for a long time, and not a lot invested in the mfg side due to the low margins. Add to that almost all of the "passive" components, resistors, capacitors, inductors etc. are also no long the old leaded type devices but very very small leadless devices. Often referred to as 0204, that is 2mm x 4mm in dimensions. some as large as 0608 6mm x 8 mm. Again these take IC like mfg processes. Lead times on the active devices even if you have massive extra capacity is still long, 8-12 weeks to complete the devices through the process once started is not uncommon. And seldom is there much of any extra capacity given the cost to build a plant and the fixed cost to keep it running.

The car mfg IMHO are someone "late to the game" of mfg with semiconductor devices in the products and hadn't experienced what happens with you cancel/change orders with a IC mfg. Having been in the electronics test equipment mfg business for decades, I can say decades ago our company learned how to react to market cycles and new the implications of what happens during market cycles with leadtimes. Couple the car mfg inexperience with something with global implications and it has been a learning experience for them I'm sure.

IMHO the issues on shortages today are split between poor planning by the end user given the impacts of COVID and supply chain implications, and capacity constraints again due to COVID on worker availability, worker safety and the supplies they need. IC's start with growing these huge (10+ inch diameter) long silicon crystal boles that then need to be cut, polished etc. and then sent off to the IC mfg. And then to increase capacity they need not only the buildings, but the equipment which is also full of state of the art electronics to do the processing.
True, jelly bean parts would include logic gates, op-amps, comparators, linear regulators, diodes, etc. You don't hear about them because they're not the latest/greatest, not on advanced nodes. But they pay the bills for the broad suppliers. Some of these parts are still on 0.5 or 0.6um processes. The wafers are cheap. Old lithography is very necessary for high voltage (>40V) parts. The parts I support have leadtimes as long as 90 weeks.
On the passives, you almost got it. Typically Rs and Cs have case sizes that are 0402, 0603, 0805, 1206. Measured in mils (thousandths of an inch). 0603 = 60x30mils. A few yrs ago there was a shortage of ceramic caps which took about a yr to clear up. Some companies were clearly hoarding parts.
Shortages also come from big customers buying more than they need. Some car companies went to JIT, some fully stocked, and the ones that went back to JIT at the wrong time were left holding the bag. Some IC foundries want to shut down old fabs and force IC designers to move to the lower nodes, which means re-design, which takes 2yrs at least, etc. If you look at the broad based chip companies, they have tens of thousands of parts they're selling. I don't think you can easily summarize it.
 
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