Opinion: Carmakers taught a lesson in hubris
Could it be that carmakers having spent years perfecting the just-in-time delivery system still thought that suppliers were at their beck and call? Did they fail to realize that while their inventory comes from multiple chip suppliers many of those chip companies are fab-lite and use just a couple of foundry suppliers in Taiwan?
The automotive supply chain was already under strain pre-Covid, and when carmakers closed plants for several weeks in 2Q20 it appears to have been what sent it over the edge.
And it would also appear that the subsequent problems may have been of carmakers own devising. The plant closures were followed by rejigged plans to continue making older models rather than accelerating moves to more advanced models. Such chopping and changing when wafers spend months just being processed in a fab has implications.
Handing out just-in-time requirements can work when the OEM has the whip-hand and can force suppliers to hold stock of components. But when supply chains are extended through many layers, each layer thinks it can control its suppliers. And when the ultimate source of supply is a single supplier for any given component the OEM is no longer in control.
That means there is no stock pile of components being held just in case the carmaker wants to increase production, or changes its plans.
Nonetheless, rather like a broken fan belt stops a car, a broken supply chain stops the car industry and it looks like this event will now force OEMs to re-evaluate the benefits of the just-in-time supply of components by globalized supply-chains.
Will that mean Volkswagen or Daimler will be trying to throw up a wafer fab and that we will be heading back towards vertically integrated OEMs? No. But it does mean that common pools of interest such as the German nexus of Volkswagen, Daimler, Bosch and Continental, Infineon and Globalfoundries could join the political movement for increased strategic independence in semiconductors.
That being the case it seems somewhat short-sighted of Volkswagen to be trying to wave the big stick and speak of claiming damages for loss of continuity of supply (see Volkswagen may claim damages over chip shortages).
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