Ford, GM to enter chip market to curb U.S.-shortage

U.S. automobile manufacturers Ford Motor Co. and General Motors (GM) Co are altering their business plan by joining the semiconductor chip market, following a computer chip shortage that disrupted their global factory output for almost a year.

On Thursday, Ford announced a calculated plan of going into business with semiconductor manufacturer GlobalFoundries Inc. to create its semiconductor chips. A move that would set the stage for U.S.-based manufacturers to join forces in production in the chip market.

In parallel, GM also announced future strategies of intertwining its business plan to halt chip shortage by establishing connections with some of the biggest names in the field, such as Qualcomm Inc., NXP Semiconductors NV, TSMC, and others. The company also unveiled that it has established agreements to co-create and manufacture computer chips.

Both companies have not revealed intentions of creating their own plants, but the Detroit-based companies stated they will “explore expanded semiconductor manufacturing opportunities to support the automotive industry.”

Ford’s vehicle embedded software and controls Vice President Chuck Gray informed The Wall Street Journal that “[we] feel we can really boost our product performance and our tech independence at the same time.”

The giants’ shift to focus on manufacturing for the chip market is one of many instances where manufacturing companies were forced to shift tactics due to the COVID-19 pandemic.

The pandemic has left detrimental disruptions to the industry, leaving companies to seek more power in controlling their supply chains by changing strategies. Ford and GM are one of many companies considering bringing production to the U.S., a permanent solution that could play a fundamental role in giving the U.S. a chance to compete with China in the semiconductor field.

Ford CEO, Jim Farley, told The Verge that the automotive company is planning to face the damaging effect of the semiconductor shortage on the industry by implementing new tactics to get back on track following the past year.

“There’s certainly one thing we can do. For single-source content, like the Renesas Naka facility that had a fire, those single-sourced chips, we can run some buffer stocks. Which is not ideal. It’s kind of a waste, but it’s better than running out of what we have,” Farley said.

“The other thing we can do is to give the foundries more confidence in future production by going directly to them. So, on behalf of our supply base, actually going and contracting purchases. I think boots on the ground in places like Taiwan and China and Asia are going to be more important to us,” he added.

Ford’s chief also elaborated that the company is considering different tactics of creating the firm’s autonomous brand by welcoming “real expertise on silicon and chip design.” A move that would help bring to the table in-house knowledge in developing software and heightening chip design expertise.

Once automotive manufacturing companies begin presenting their personal designs, Ford and GM will enhance their own vehicles’ characteristics, such as automated-driving abilities, and improve battery systems for electric systems.

Ford and GM’s venture of entering the chip manufacturing field is a clear demonstration of how today’s automakers are delivering leading technologies to in-house manufacturing to heighten expertise critical areas to intensify future rivalry in the U.S. and potentially with China.

Given that with the rise of the digital era, all innovations rely heavily on chips, once automotive makers start creating faster and better chips, their product could be distributed on a much larger scale to accommodate the chip market needs.