Major Automakers To Design Their Own Semiconductor Chips By 2025: Report

The move towards adding more technology and the drive towards electrification exponentially increased the consumption of semiconductor chips in cars. And the auto industry is currently dealing with a major supply shortage of these chips in the wake of the pandemic. The shortage forced automakers to shut down production and even restrict vehicle variants as the more profitable versions received priority. This further impacted the auto sector which was already recovering from low sales. However, a recent report suggests that automakers are now looking to take the matter into their own hands with at least half of the top 10 auto OEMs planning to design and produce their own chips by 2025.

Also Read: Continental Automotive Records Volume Erosion In 2021 Due To Semiconductor Issue

A report by technology research and consulting company Gartner said that chip shortage coupled with trends such as electrification and autonomy will drive 50 per cent of the top 10 automotive original equipment manufacturers (OEMs) to design their own chips. This will give carmakers control over semiconductor supply chain constraints.

An 8-inch wafer inside a TSMC Foundry | Photo Credit: TSMC

In a press release, Gaurav Gupta, Research Vice President - Gartner said, "Automotive semiconductor supply chains are complex. In most cases, chipmakers are traditionally Tier III or Tier IV suppliers to
automakers, which means it usually takes a while until they adapt to the changes affecting automotive market demand. This lack of visibility in the supply chain has increased automotive OEMs' desire to have greater control over their semiconductor supply."

In its report, Gartner pointed out that the ongoing chip shortage is primarily with the mature semiconductor technology node devices. These are fabricated on the smaller 8-inch wafers and production expansion here is difficult.

Gupta added. "The fact that the automotive industry has been conservative in qualifying older devices on larger wafer sizes has also hurt them and will likely motivate them to take chip design in-house."

The surge in demand for consumer electronics during the pandemic was one of the contributing factors to the chip shortage

The report further states that the model of bringing chip design in-house, popularly known as 'OEM-Foundry-Direct', isn't unique to the automotive industry. This will intensify among tech companies as there are changes happening in the semiconductor market.

Also Read: Tata In Talks To Set Up $300 Million Semiconductor Assembly Unit: Report

Semiconductor chip makers such as TSMC, Samsung among others have given access to advanced intellectual property that makes custom chip design relatively easy, states the report. "We also anticipate that the lessons learned from the microchip shortage will further drive automakers to become tech companies," said Gupta.

Gartner's report also states that it expects the average price of a new vehicle to be around $50,000 in the US and Germany, which will lead to greater repair of older vehicles. This price increment is expected to shrink new car sales and increase the market for parts and upgrades. OEMs are more likely to push for new services and upgrades of equipment and computers as new car sales remain flat in the coming years.