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I don't really believe that such thing as a shortage exists in a free-market economy. Executives who complain of shortages are just way too rigid with their pla

I don't really believe that such thing as a shortage exists in a free-market economy. Executives who complain of shortages are just way too rigid with their planning and are not willing to pay the increased price. Exactly this goes for VW.

zarkov99 6y ago
I don't think that is right in the short term, which is the time horizon the article discusses. Eventually, baring an actual physical resource constraint, the market will take care of it but in the short term something will have to give.
npunt 6y ago
Your faith in free markets may be a bit misplaced. There's a long history of semiconductor shortages followed by markets being flooded due to lack of demand predictability and the capital costs and lag time of scaling manufacturing. DRAM manufacturers have several times illegally colluded to avoid these circumstances (and thus maintain profit margin).
jariel 6y ago
Structural barriers are 'real things' even in free market economies. The size, complexity, barriers to entry, massive government subsidies, geopolitics are all part of the equation at that level. If this was about 'wheat' or 'shoes' then yes, but at this level the equation is different. Also, these execs are not dumb, if they could just 'adjust their price and sell 100K more cars' ... well, they've thought of that. Probably what needs to happen is Merkel, Bojo, EU leadership (and same in other countries) might need to pipe in with something to facilitate the economy, but that's also fraught with risks, it's not like Norway Statoil whereby they just have to 'get the Oil from under the sea and it's bank'.
bluGill 6y ago
Car makers are big, but to a chip maker they are a tiny customer. I suspect more than one car maker has considered making their own fab, but the costs are just too high. (My company has in fact done that, we didn't open a fab last year because of the costs - I'm not sure that was the right decision given the costs we have spent porting working software to the replacement instead, and we have a fraction of the volume of the big auto makers) Manufacturing is a core competency of any car maker (second to supply chain). I wouldn't be surprised to see a fab partner ship between automakers in the future just to ensure they can get the chips they need. This will be at least as much about ensuring old chips don't go obsolete as about supply.
- IndrekR 6y ago
  Opening own fab probably does not make sense for passenger cars. It may be reasonable for high volume long lifetime speciality vehicle producers (John Deere, etc). That will not be 'a 3nm fab', however.
ahepp 6y ago
Auto companies cut the orders because they anticipated falling demand[0] >Mr Duesmann described the problems as “a crisis upon a crisis”. Demand for cars slumped for much of last year because of the coronavirus pandemic, prompting auto suppliers to cut their orders for the computer chips that manage everything from a car’s brakes and steering to its electric windows and distance sensors. >But demand for cars jumped unexpectedly in the final three months of 2020, as buyers became more optimistic. Audi had its best quarter ever, largely because of a rebound in China. [0] https://on.ft.com/39V7w9h https://on.ft.com/39V7w9h (paywalled after 3 free accesses)

zarkov99 6y ago

I don't think that is right in the short term, which is the time horizon the article discusses. Eventually, baring an actual physical resource constraint, the market will take care of it but in the short term something will have to give.

npunt 6y ago

Your faith in free markets may be a bit misplaced. There's a long history of semiconductor shortages followed by markets being flooded due to lack of demand predictability and the capital costs and lag time of scaling manufacturing. DRAM manufacturers have several times illegally colluded to avoid these circumstances (and thus maintain profit margin).

jariel 6y ago

Structural barriers are 'real things' even in free market economies. The size, complexity, barriers to entry, massive government subsidies, geopolitics are all part of the equation at that level. If this was about 'wheat' or 'shoes' then yes, but at this level the equation is different. Also, these execs are not dumb, if they could just 'adjust their price and sell 100K more cars' ... well, they've thought of that. Probably what needs to happen is Merkel, Bojo, EU leadership (and same in other countries) might need to pipe in with something to facilitate the economy, but that's also fraught with risks, it's not like Norway Statoil whereby they just have to 'get the Oil from under the sea and it's bank'.

bluGill 6y ago

Car makers are big, but to a chip maker they are a tiny customer. I suspect more than one car maker has considered making their own fab, but the costs are just too high. (My company has in fact done that, we didn't open a fab last year because of the costs - I'm not sure that was the right decision given the costs we have spent porting working software to the replacement instead, and we have a fraction of the volume of the big auto makers) Manufacturing is a core competency of any car maker (second to supply chain). I wouldn't be surprised to see a fab partner ship between automakers in the future just to ensure they can get the chips they need. This will be at least as much about ensuring old chips don't go obsolete as about supply.

IndrekR 6y ago
Opening own fab probably does not make sense for passenger cars. It may be reasonable for high volume long lifetime speciality vehicle producers (John Deere, etc). That will not be 'a 3nm fab', however.

ahepp 6y ago

Auto companies cut the orders because they anticipated falling demand[0] >Mr Duesmann described the problems as “a crisis upon a crisis”. Demand for cars slumped for much of last year because of the coronavirus pandemic, prompting auto suppliers to cut their orders for the computer chips that manage everything from a car’s brakes and steering to its electric windows and distance sensors. >But demand for cars jumped unexpectedly in the final three months of 2020, as buyers became more optimistic. Audi had its best quarter ever, largely because of a rebound in China. [0] https://on.ft.com/39V7w9h https://on.ft.com/39V7w9h (paywalled after 3 free accesses)