Automakers Take a More Active Role in Semiconductor Sourcing

2021 has been a painful year for the auto industry, but not in the ways that anyone was expecting. While demand for new vehicles rebounded much more quickly than anticipated, global production and sales are likely to fall short of pre-pandemic levels by 10%-15%. The chief culprit is a shortage of the chips that make modern vehicles work. Since early 2021, the industry has been scrambling to find new sources and adapt future products to become more resilient.

The global chip shortage has been caused by a confluence of challenges, including increasing demand from nearly every market sector, concentration of relatively few chip foundries in few locations, and natural disasters and COVID-19 flare-ups that have disrupted production. For the auto industry, these scenarios have been exacerbated by the design practices of the past several decades.

Old Sourcing Methods Have Vulnerabilities

As electronics took over the vehicle, the electronic architecture evolved in a very ad hoc way. New features were provided by an array of suppliers as a package of sensors, actuators, and an electronic control unit (ECU) with embedded software. The suppliers would source the chips in those ECUs by selecting the lowest cost and most robust components they could find. This often led to using parts produced on older, larger process nodes with larger transistors. These were often 24 nm to 90 nm processes; current chips are based on 5 nm or smaller processes. Chip foundries have focused on newer production processes at the expense of these older components.

The auto industry has responded by accelerating the transition to next-generation electrical/electronic (E/E) architectures that consolidate 100 or more discrete ECUs to a handful of more powerful central computers. The software from those older ECUs is being imported to new compute platforms and runs in virtual machines that can emulate the original ECU. These compute platforms are utilizing more powerful updated systems-on-a-chip (SoCs) like the NVIDIA Orin and Qualcomm Snapdragon Ride.

In the past, automakers largely left chip sourcing to suppliers of those individual features—companies such as Bosch, Continental, Aptiv, ZF, and DENSO. That is rapidly changing as automakers move to sourcing chips directly and taking more control of the E/E architecture. In July 2021, Volvo announced that its 2022 replacement for the XC90 would use a central compute with two Orin SoCs. XPeng, SAIC Motor, and Mercedes-Benz will also use these chips in future vehicles. GM announced that it was working with NXP, Taiwan Semiconductor Manufacturing, Qualcomm, Renesas, and others on sourcing modern chips for its new platforms.

Automakers Should Embrace New Sourcing Strategies

Ford has different strategy—moving its sourcing upstream through a partnership with chip manufacturer GlobalFoundries to bring more advanced chip production to North America. Also, Stellantis just announced a partnership with Foxconn to develop the STLA Brain E/E architecture for its upcoming EV platforms using high performance SoCs designed and sourced by the Taiwanese supplier.

All of these efforts are aimed at creating architectures that are more adaptable to changing conditions while diversifying production locations. These should help make the ecosystem more resilient to disruptions caused by natural, medical, or geopolitical disasters as automakers meet new performance requirements.