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Semiconductors, Apple and the automotive industry

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The Apple company had a better strategy to guarantee the supply of semiconductors compared to the auto industry, according to a White House report.

The report explains in part how the great global semiconductor shortage problem occurred and how it affected the automotive sector in particular.

In the paragraphs below, the White House thus refers to what happened.

While semiconductors became the key to running modern vehicles more than a decade ago, many automakers didn’t begin communicating directly with semiconductor manufacturers until late 2021.

Rather, they purchased chips indirectly, through dealers or tier one suppliers, and did not commit to purchases more than a few weeks in advance.

Thus, although their product plans included more intensive use of semiconductors in future vehicles, automakers had not credibly signaled this intention to manufacturers.

Without this commitment, semiconductor manufacturers were unwilling to build new factories for automotive-grade chips, since factories must maintain very high capacity utilization to be profitable.

In addition, they have not devoted resources to innovate in dimensions important to automakers, such as reduced costs and increased reliability.

Instead, Apple has long paid to reserve capacity in advance in factories and has worked with semiconductor manufacturers and design firms to innovate in the dimensions important to them: speed and power.

Semiconductors

Finally, widespread international government subsidization of manufacturing industries has lowered the prices that leading companies pay for inputs and has steered domestic industry in many nations toward participation in the global supply chain.

For example, in recent decades, the Taiwan Industrial Technology Research Institute has facilitated relationships between young domestic semiconductor manufacturers and multinational buyers.

The institute helped organize two companies, Taiwan Semiconductor Manufacturing Company and United Microelectronics Corporation, and gave them intellectual property.

By 2020, these two companies accounted for 60% of global semiconductor revenue.

Taiwan and China have heavily subsidized their semiconductor industries, with subsidies often approaching nearly 30% of a company’s revenue, according to the US Department of Defense.

 

Redacción Opportimes

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