A chip shortage that started as consumers stocked up on personal computers and other electronics during the Covid-19 pandemic now threatens to snarl car production around the world.
GM said that it would extend production cuts in the U.S., Canada, and Mexico until the middle of March. They join a long list of major automakers, including Ford, Honda and Fiat Chrysler, which have warned investors or slowed vehicle production because of the chip shortage.
Chipmaking is a high-volume business that calls for incredible precision, along with making huge long-term bets in a field subject to rapid change. Chips are made in plants that cost billions to build and equip. They have to run flat-out 24/7 to recoup their investment. But it’s not just that. Yield, or the amount of good chips per batch, determines success or failure. It takes years of know-how and experience to get a yield of 90% out of the complex photolithographic process used to make chips. Imagine Ford Motor Co. being happy to throw away one car in 10. But chipmakers, who make millions of chips in a process that takes three to four months to complete, are successful if they’re hitting that mark. A foundry gobbles up enormous amounts of water and electricity and is vulnerable to even the tiniest disruptions (whether from dust particles or distant earthquakes).
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