(Bloomberg) — Hello Hyperdrive readers, it’s Andrew Grant from BloombergNEF here.
Last week CES — formerly the Consumer Electronics Show — returned to Las Vegas. While some companies chose to attend virtually there still were lots exciting developments, from BMW’s chameleon-like car to an autonomous vehicle race.
Readers of this newsletter are well aware that automakers are in the midst of a severe shortage of semiconductors. They have come to rely on these computer chips for everything from airbags to infotainment. As such, car company announcements at CES 2022 were highly focused on new digital features, self-driving features or the electrification of the drivetrain, which all require more semiconductors.
Some of the largest semiconductor companies globally — which only really began to notice the automotive industry over the last decade — are bolstering their vehicle offerings. Nvidia, Qualcomm and Intel/Mobileye in particular have fast-growing automotive divisions. These companies are taking on rivals like Infineon, NXP, Renesas and Texas Instruments which have a longer history with auto companies. Intel’s activities are growing fast enough that it plans to take its Mobileye division public in 2022.
Automakers need the attention of semiconductor companies and should cultivate these relationships for two reasons. First, it’s easier to develop new technologies when you are working with a committed and capable partner. Second, working with semiconductor companies on long-term projects will help to strengthen the relationships.
Automakers operate on different product timelines and demand different specifications than many of the chipmakers’ largest clients. This has required extra attention and testing on what have been relatively lower-value chips. Now, automakers are readjusting their processes to ensure a robust supply of semiconductors, not just for the lower value automotive chips that are common in internal combustion vehicles, but also for the chips needed for their increasingly connected, autonomous and electric product lines.
That’s one way they’ll increase their influence in the semiconductor value chain. That will likely lead to more partnerships similar in nature to some of the deal announcements at CES, such Mobileye’s agreement to deepen ties with Ford and Volkswagen and GM’s announcement that its hands-free driver assist system, Ultra Cruise, will be powered by semiconductors from Qualcomm.
Much like the Covid-19 pandemic, the semiconductor shortage has come in a series of waves. Automotive factory closures peaked between August and September 2021, followed by a brief reprieve before returning to high levels in mid-October. In addition to these closures, many automakers operated their production lines at reduced capacities.
Chip shortages remain a concern for the coming year. The automakers with a direct line to the most influential chipmakers will be able to best ride the waves.
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