as the global chip shortage stretches to the two-year mark, manufacturers pull off some unusual tricks to keep production lines moving. Automakers use semiconductors from washing machines, rewrite code to use less silicon, and even ship their products without chips, promising to add them later. Now that the shortage of semiconductors has become a new normal, everyone is being forced to adapt.
“There is desperation in the market,” said Bill Wiseman, senior partner at the consulting firm McKinsey. “If you build a $350,000 mass spectrometer and you can’t ship it because you don’t have a 50-cent chip, you’re pretty much willing to pay for anything.”
McKinsey has tapped into the sense of urgency by creating a team dedicated to sourcing chips for the companies it advises. Wiseman says the team will look beyond mainstream supply chains and have found much-needed chips in Morocco, the Netherlands and Japan, among others. They have also been able to identify chips that may differ slightly from the chips originally requested. Of course, manufacturers and brokers can charge a premium and companies have little choice but to pay. “The chips are really there,” Wiseman says. “It’s just a matter of finding them and getting them.”
In some cases, this means taking desperate measures. Last month, Peter Wennink, CEO of Dutch company ASML, which makes the complex machines needed to make advanced computer chips, revealed another eye-opening example. Wennink says a major industrial conglomerate had resorted to buying washing machines to clear out the chips they contain for its products.
The chip shortage was caused by several factors, including a rush to buy electronics needed to work from home during the pandemic, a chip hoard due to trade tensions between the US and China, and disruption of the flow of components through a complex. semiconductor supply chain across the globe.
The crisis has highlighted how crucial semiconductors are to the economy and demonstrated how fragile many supply chains are. Industries that have been hit hard include consumer electronics, LED and other lighting, energy and automobiles. At the start of the pandemic, automakers halted production and canceled chip orders before being overwhelmed by rising demand. Car companies have ended up at the back of chip orders and have struggled ever since to catch up.
Automakers have started stripping features from vehicles rather than shutting down production lines. Last September, Cadillac said it would remove the hands-free feature from some vehicles. In November, Tesla started selling cars without USB ports. And in May, Ford said it would ship some models without chips for non-critical functions like heating controls and that dealers would add them at a later date.
Mike Juran, CEO of Altia, a company that makes software for building interfaces for cars and devices, says many companies rewrite their code so that it works with different chips or that a single chip doubles the work. In some cases, Juran says, companies are using chips that are as old as 10 years. “They trade chips with what’s available,” he says. “We’re going to have them go back to old chips that were in warehouses, which weren’t cutting edge, but we can get the same GUI there.”
