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30-05-2023 | Automotive Industry | In the Spotlight | Article

What the Automotive Industry can Learn from the Semiconductor Crisis

Author: Christiane Köllner

5 min reading time

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The chip shortage has long burdened the car industry. In order to be better prepared for such crises in the future, ISF Munich provides the automotive industry with guidelines for an optimized semiconductor strategy. The six measures at a glance.

The shortage of semiconductor chips has kept the automotive industry on tenterhooks in recent years. At many production sites, shifts have had to be canceled, series suspended, plants temporarily closed and employees repeatedly put on short-time work because of chip shortages. What insights and lessons has the automotive industry learned from the chip crisis? At the ISF Munich - Institute for Social Science Research, the background and lessons learned from this crisis have now been examined in an expert report within the framework of the BMBF project HyValue. The analysis shows that "business as usual" is no longer an option for companies in the automotive industry.

At first glance, the cause of the chip crisis seems to lie in the supply chains for semiconductors - namely in a "classic bullwhip effect [...] in which fluctuations in demand have built up into enormous dissonances," as the industrial sociological study by ISF Munich puts it. But that would be too short-sighted, as the authors go on to point out. The phenomenon of the chip crisis in the automotive industry is connected with more than just a supply chain problem. In the long term, the developments cannot be brought under control with the classic measures of supply chain management alone. Rather, the crisis "revealed a development dynamic that has its roots in deeper structural changes in the core products of the automotive industry and the role of semiconductors in vehicles," according to the study.  

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Sensor data as well as their processing and fusion are core elements of functional safety. They also play a key role in the automation of driving. The quality of the data depends essentially on the components that act throughout the sensor signal chain. These semiconductor devices are thus proving to be the drivers for ADAS sensor development.

Electrification and software change role of semiconductors

Semiconductors have become strategic building blocks. "With the electrification and softwareization of vehicles, which are shaping the current transformation of the industry, the role of semiconductor use in vehicles is instead changing fundamentally," says Dr. Alexander Ziegler, who led the creation of the expertise at ISF Munich. Not only are more and more chips needed in terms of numbers, but they are also advancing as power electronics and high-performance computers to become strategic components in the software-defined electric vehicle.

Together with the chip crisis, this marks a turning point for semiconductor use in the automotive industry. "The overarching significance of the chip crisis is primarily that it has brought into focus this turning point for semiconductor use in the automotive industry and the challenges it poses for companies," the scientist emphasizes. What is needed, he says, is a far-reaching redefinition of their semiconductor strategies and cooperation with the companies in the semiconductor industry.

Redrafting of semiconductor strategies required

In their analysis, the Munich-based scientists have identified six areas that need to be addressed as a matter of priority by companies in the automotive industry. From this, initial considerations are to be derived as to how companies can both better deal with disruptive events in the value chain in the future and set up their semiconductor strategies for the future against the backdrop of the transformation of the automotive industry.

  1. Establish transparency on semiconductor requirements: Establish end-to-end information systems
    According to the study, many companies in the automotive industry have not yet had complete transparency about which semiconductors are used in vehicles, which companies manufacture them and how they get into the end product. For this reason, a key area of design is "to continue the work begun in many task forces to build end-to-end, easy-to-use information systems across the entire value creation process and to make them permanent in the organizations," it says.
  2. Actively manage semiconductor risks: Establish NextGen risk management
    In addition, the aim is to develop a comprehensive next-generation risk management system that is data-driven. On the one hand, this should make it possible to reactively identify disruptive events and their potential effects immediately, and on the other, to develop measures to minimize risks preventively. Preventive measures include, for example, the establishment of permanent communication channels along the supply chain, the development of alternative suppliers, the identification and stockpiling of individual strategic semiconductor components and the reduction of the variance of the semiconductors used.
  3. Semiconductors as core components: Developing holistic chip strategies for vehicles 
    According to the study, the strategies for the use of semiconductors in companies in the automotive industry fall short and do not do justice to the qualitative increase in the importance of semiconductors. Semiconductor strategies should not be delegated "to the silo perspective of individual departments and component managers," it says. Instead, a holistic strategy for semiconductor use in vehicles should be developed and implemented. "Key elements range from realigning semiconductor use around high-performance SoCs and reducing the number of ECUs used in centralized software and electronics architectures to standardization and unification in the chips used," the study says.
  4. Create collaborative value architectures: Building partnerships with chip manufacturers
    Relationships between companies in the automotive and the semiconductor industry have so far been essentially characterized by a transactional nature, the researchers said. "The chip crisis has sharpened the view that such a form of cooperation is no longer purposeful," the study says. A key area of design, therefore, is to establish long-term, partnership-based relationships with companies in the semiconductor industry and to establish improved long-term planning across the entire value chain, they say.
  5. Strengthening semiconductor competence in the automotive industry
    The study shows that the chip crisis has revealed a need in many companies in the automotive industry to build up competence in the semiconductor industry and its products. In addition to specialized technological know-how on the design, manufacture and use of semiconductors, this also relates to knowledge of key characteristics of the industry, the organization of its value creation processes and experience-based knowledge. Therefore, in the future, semiconductor competencies should be placed on a broader basis in addition to software competencies. On the one hand, the training and promotion of specialists in the areas of chip design or process and testing technology is necessary, on the other hand broad-based qualification and further training measures.
  6. Build circular economy: Implement recycling strategies for semiconductors
    Just as with batteries, recycling strategies should also be implemented for recovering the raw materials used in control units and sensors, according to the study. These would then be available for the production of new chips as part of a circular economy. In addition to extending the product life cycles of vehicles and their semiconductors, important elements of a sustainable design of the recyclable material flows could include improving reprocessing methods to increase recovery rates and developing efficient dismantling processes.
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