Bosch
Harald Kroeger, a member of the Bosch management, has made official what most car experts think about the current shortage of materials. The entire production system linked to chips and technology no longer works as it was initially thought and it is not just the fault of Covid (and related production stops). Speaking to CNBC, he explains why there have been all the problems in recent months and how we can get out of it even if it takes a long time. Since we are talking about the main supplier of automotive components it is at least necessary to take note of these statements.According to Kroeger, the entire automotive industry has never prepared itself in the right way for the unexpected, of which obviously Coronavirus is the worst version. In recent months, for example, the snowfall in Texas has blocked some factories, as have fires and other fatalities in other areas. In all cases, chip production has suddenly stopped due to lack of inventory, causing the domino effect that we still see now, for example in the latest Toyota announcements.
With much of the production located in Asia , there are not many alternatives but to build new factories. For his part, Bosch has just opened the new plants in Dresden but obviously they will not be enough to limit the current problems. Since 90% of the materials, mainly technological, come from countries like Taiwan and from companies like TSMC. In addition, it should be remembered how much technology is needed nowadays outside the car world including smartphones, computers, televisions and so on.
In all this, the coup de grace came from the sudden growth in sales (and therefore in production) of electric cars. Given that an electric car requires almost seven times more technological parts, read chips, than thermal engines, many manufacturers have found themselves facing an impassable wall. Because advanced battery management, to optimize charge and autonomy, remains the priority in all electrical systems and requires special control units / computers.
Ultimately, Bosch hopes that all this will serve as a lesson in changing the operation of the entire industry. Meanwhile, manufacturers and customers will have to wait for current suppliers to get back on track with all orders.
Bosch says the semiconductor supply chains in the car industry no longer work
© Provided by CNBCGerman technology and engineering group Bosch, which is the world's largest car-parts supplier, believes semiconductor supply chains in the automotive industry are no longer fit for purpose as the global chip shortage rages on.
Harald Kroeger, a member of the Bosch management board, told CNBC's Annette Weisbach in an exclusive interview Monday that supply chains have buckled in the last year as demand for chips in everything from cars to PlayStation 5s and electric toothbrushes has surged worldwide.
Coinciding with the surge in demand, several key semiconductor manufacturing sites were forced to halt production, Kroeger said.
In February, a winter storm in Texas caused blackouts at NXP Semiconductors, which is a major provider of automotive and mobile phone chips. In March, there was a fire at a semiconductor plant in Japan operated by Renesas, one of the car industry's biggest chip suppliers. In August, factories in Malaysia have been abandoned as national lockdowns were introduced to reduce the spread of the coronavirus.
Volkswagen and BMW cut their production as they struggled to get the chips they needed to build their cars. These companies and semiconductor suppliers should now be looking to figure out how the chip supply chain can be improved, Kroeger said.
'As a team, we need to sit together and ask, for the future operating system is there a better way to have longer lead times,' he said. 'I think what we need is more stock on some parts [of the supply chain] because some of those semiconductors need six months to be produced. You cannot run on a system [where] every two weeks you get an order. That doesn't work.'
Semiconductor supply chain issues have been quietly managed by the automotive in the past but now is a time for change, according to Kroeger, who believes demand is only going to increase with the rise of electric vehicles and autonomous vehicles.
'Every car that gets smarter needs more semiconductors,' Kroeger said.
Electric cars need very powerful and efficient semiconductors in order to to get more range out of each kilowatt hour of battery, he added.
UBS analyst Francois-Xavier Bouvignies told CNBC last week that cars with internal combustion engines typically use around $80 worth of semiconductors in the powertrain, but electric vehicles use around $550 worth.
New chip plantBosch has built a new 1 billion euro ($1.2 billion) semiconductor plant in Dresden — the capital of the German state of Saxony and one of Europe's biggest semiconductor clusters — over the last two years and production started last month.
'The fact that we actually started to build this plant a couple of years ago shows that we expected the demand to go up dramatically,' said Kroeger.
Bosch board member expects global chip shortage to last until at least 2022
SHARE
SHARE
TWEET
SHARE
Click to expand
UP NEXT
Other chip heavyweights including Intel and TSMC are planning to set up new factories in the next few years as part of an effort to boost production.
Kroeger said he expects the chip shortage to extend 'way into 2022' adding that he hopes demand remains stable. 'We need to ramp up supplies so we can fulfil that demand,' he said.
Striving for sovereigntyGerman President Frank-Walter Steinmeier told CNBC this week that the plant comes at a crucial time for the industry, adding that Germany and Europe are still a long way from achieving digital sovereignty in semiconductor production.
'It's important and right that Bosch has chosen to invest here at a time when we see supply squeezes on international markets,' he said during a visit to the new Bosch facility.
'I think the current situation gives us an added push to be stronger in this field,' added Steinmeier.
The number of people working in the semiconductor sector in Dresden has risen from 45,000 to 70,000 over the last decade, according to Frank Bosenberg, managing director of tech network Silicon Saxony.
'We expect further growth to 2030 of up to 100,000,' Bosenberg told CNBC.
Catching up with AsiaThe vast majority of the world's chips are produced in Asia, with TSMC being the biggest chip producer worldwide. Europe accounts for just a fraction of global semiconductor production.
'Europe has a demand of 20% and production of less than 10% right now,' Bosenberg said.
European chip manufacturers on par with Asia: Silicon Saxony MD
SHARE
SHARE
TWEET
SHARE
Click to expand
UP NEXT
He thinks Europe should increase semiconductor production, but he noted that it's a global industry and no one country is even close to being autonomous.
Dutch semiconductor equipment seller ASML is the only company in the world capable of building the machines that TSMC needs to make the most advanced chips, which are used by the likes of Apple
ASML is a 'major asset within the industry,' Bosenberg said.
German president: We have come to understand the complexties of semiconductor fsaciltiies
SHARE
SHARE
TWEET
SHARE
Click to expand
UP NEXT
Clarification: This article has been updated to clarify that ASML makes the machines that TSMC uses to produce the world's most advanced chips.