Car Chip Shortage to 2024 and Tesla Mostly Immune

I, Brian Wang, have researched the car chip shortage. Many people have said that the car chip shortage will clear up by the second half of 2022 but they are wrong. The car chip shortage will last until 2024. Tesla has already been handling the shortage better than the other car companies and I have made a video that explains why Tesla is managing better.

What is the car chip shortage and why did it happen? The car chip shortage is a shortage and lack of availability for about 10% of the needed chips. This was mainly caused by the COVID related supply chain disruptions. Carmakers made this worse early in the Pandemic when car sales dropped and carmakers responded by canceling chip and supply orders. They anticipated fewer sales. However, the stimulus brought the economy and car sales back more quickly. Car chips are some of the lowest technology chips that are made. They are made at fabs that are 10-30 years old. Video game console demand went way up and some other stay-at-home products had higher demand. Car chips were at the back of the line.

The length of the shortage relates to how many cars are planned or expected to be built. 2023 would be when there are chips for 80 million cars which was the target for 2021. However, a fully functioning world economy could have demand for 100 million cars. In 2017, there was demand for 95 million cars. 2023 should be a lot better than 2021 but there would still be constraints on car production if cars are not redesigned for more efficient usage of chips or if some new supply from a few more factories is not enough for even higher demand.

It takes two years to make a new semiconductor factory. Chip companies do not want to make a lot of the 20-30 year semiconductors. They want to move forward to up-to-date chip technology.

Joe Justice is an ex-Tesla employee who has described Tesla’s Agile processes. Tesla runs 100% tests that are completely automated for each car. They can trigger the tests to validate over the air software updates or for any changes to the cars as they are built in the factory. Each car has a digital duplicate that describes all components in the car. The digital duplicate and the 100% automated testing has been enabling Tesla to make an average 20 changes per week for cars being built in factories. This means that one Model Y being built a particular way with particular parts and the very next Model Y can be different. They can use different chips or different HVAC or different wiring. The change can be made and tested immediately to confirm that high standards are still met.

There are about 6 major car chip making companies and about 8 almost major car chip makers and many smaller car chip makers. Tesla was able to write new firmware in 2 weeks for each new chip supply source they accessed. Tesla got more chips from more suppliers. Ford used Renesas almost exclusively for chips and could not shift to other sources when Renesas had a fire at a factory.

Other car companies just assumed chip suppliers could solve production issues and have been adding chips to cars for many years. The number of chips in cars has doubled since 2017. There were enough chips for 95 million cars in 2017 but only enough for 71 million cars in 2021. The overall amount of car chip did not decrease but did not increase enough to meet increased demand.

Tesla has been able to redesign how chips are used in their car. They have a new network inside that enables the newest Model S to use 20 microcontroller chips instead of 80. The supply of 80 MCU chips is enough for four cars instead of one.

Tesla makes their own chip design for their self-driving system. This is an advanced chip fabricated by Samsung. Other carmakers use chips and self-driving systems designed by Nvidia that are fabricated by TSMC or Samsung.

The other carmakers use advanced chips for LIDAR and the AI brains for the self driving or driver assist systems. Tesla does not use LIDAR. Tesla only uses inexpensive microcontrollers, sensors and other chips that are usually pennies to less than a dollar and their own self driving AI chip. Tesla uses fewer of the inexpensive chips and has designed to use slightly more advanced versions that are not in short supply whenever possible.

Tesla is more able to adapt to short term shortages by accessing more suppliers and Tesla reacts to longer term shortages by designing for expected availability.

Written and analyzed by Brian Wang. Sources- Infineon, NXP, IHS Markit, IEEE, Accenture