While the entire world is moving towards electric vehicle and autonomous vehicles, the sudden spurt in demand for semiconductor is crippling the industry, writes Jaishankar Jayaramiah, Editor, Automotive Lead.
Demand for the new technology has skyrocketed, both in the Europe and United States markets. And this has major companies rushing to get onboard this surging trend.
That includes everyone from legacy automakers like Ford and General Motors… to trillion-dollar technology giants like Apple. But the global pandemic has hurt the automotive industry in a completely unexpected way.
With millions of people working, schooling, and entertaining from home, the quantum of technology devices has exploded beyond the expectations. As a result, chipmakers have struggled to keep up with production of the semiconductors.
Nearly every electronic device requires these chips to run. Every laptop, iPhone, Xbox, Television and more. But because electric vehicles often require over 100 semiconductors, it’s put them in a position where automakers don’t have the pieces to build the electric vehicle. Which is why automakers are now seeing backlogs of more than 40 weeks before they’ll get the tiny chips needed to build their electric vehicles.
That means it could be another 9 months before they’re able to add more chips to start production again in some places. And that could explain why companies helping to bridge that gap are surging right now.
Facedrive (FD,FDVRF), for example, has seen success growing its business over the past year. They recently acquired electric vehicle subscription company, Steer, from the largest clean energy producer in the United States. And while automakers are struggling to produce enough new vehicles for every customer to buy their own EVs…Steer’s subscription model is putting a major twist on the traditional car ownership model, where customers can borrow one whenever they need it instead – and at a fraction of the cost.
With Facedrive’s acquisition of Steer, customers pay a simple monthly fee like with Netflix, and they get access to their choice of EVs from a fleet at their disposal. It’s these kinds of innovative moves that have helped Facedrive lock in a number of important partnerships and deals with government agencies,
As we monitor the growing semiconductor crisis, it’s likely that creative solutions will be key in bridging the gap to the inevitable EV future.
The urgent semiconductor shortage has forced major automakers to dial back on production. The companies like Ford and Volkswagen scaling down in temporarily. It’s caused several automakers to even go as far as to shut down production plants altogether in some places. This growing issue is already costing automakers billions of dollars.
Asian chip makers
That’s why they’ve gone as far as to develop a lobbying body that represents GM, Ford, and other automakers in the US. And they’re pressing the government to convince Asian chipmakers to send more chips their way for EVs.
So instead of allocating chips to tech devices with higher profit margins like iPhones and computers…They hope to have them directed toward building new EV Suburbans and Mustangs.
Given the amount of resources being poured into solving this issue though, it’s only a matter of time until production ramps up and EVs are expected to roll off the production lines faster than ever.
EV Markets Racing Ahead
As the issue of chip production gets ironed out, the surge in demand for EVs has many companies in the industry racing ahead toward massive gains. Tesla locked in over 700% gains on its way to becoming one of the largest companies on the S&P 500 in 2020. And Biden’s “green” platform is giving the EV markets a healthy boost as well.
He recently announced he plans to build out 550,000 electric vehicle charging stations across the country, so it leaves no question what direction the auto industries will be heading in the years to come. With the growth we’ve seen in this area already, it’s caused shares for companies like Plug Power to soar over 1,000% in 2020.
As the demand and interest in EVs continues on in 2021, there are sure to be growing pains on the path to ramping up chip production. And in the end, the companies seeing the biggest success may be those helping smooth out the gaps as we race towards a future driven by electric vehicles.
Much like Tesla, NIO Limited (NIO) got off to a rough start. In fact, it was even on the brink of bankruptcy in 2019. But China’s answer to Tesla’s dominance powered on, eclipsed estimates, and most importantly, kept its balance sheet in line. And it’s paid off. In a big way. The company has seen its share price soar from $3.24 at the start of 2020 to a high of $50 earlier this year, representing a massive 1443% returns for investors who held strong.
And it hasn’t stopped there. NIO recently unveiled a pair of sedans that would make even the biggest Tesla devotees turn their heads. The vehicles, meant to compete with Tesla’s Model 3, could be just what the company needs to pull back control of its local market from Elon Musk’s electric vehicle giant.
Leading a revolution on another auto-revolution is Waymo, a subsidy of tech giant Alphabet Inc. Waymo may just be the de facto leader in the emerging autonomous vehicle industry. It’s already had cars driving themselves across the United States for several years.
And though Alphabet gets a lot of the credit for the autonomous vehicle revolution, a widely loved and wildly popular chipmaker is at its core. Intel Corporation (INTC) and Waymo teamed up way back in 2017, and have worked together to fine tune their technology together ever since. Through their mutual knowledge of hardware and software, the tech giants have made leaps and bounds towards building the car of the future.
In addition to its efforts with Waymo, Intel has also been on the forefront of developing its own artificial intelligence and vision hardware. Back in 2017, it acquired MobileEye, a supplier of camera-based chips and software to the global mobile industry. And now, in a new deal with Luminar, another emerging tech company on the forefront of this movement, Intel is positioning itself as its own giant of this new sector.
Nvidia Corporation (NVDA) is another one of the chipmakers and semiconductor makers fueling the revolution in transportation. And it’s also riding the ESG wave to boot.
With more and more demand coming for semiconductors and new chip technology hitting the market, companies like Nvidia and Intel are going to be some of the biggest benefactors. They’re already well-known in the industry, and this could just be their time to really shine.
Taiwan Semiconductor Manufacturing Company is the world’s largest contract chip manufacturer, meaning it’s tasked with making chips for dozens of fabless tech companies including Apple, Qualcomm, Nvidia and Advanced Micro Devices (AMD) among others.
AMD, for its part, used to control its own factories which bore a huge burden on the company’s bottom line. Now that it has spun its fab department into its own company called GlobalFoundries in 2009, however, it contracts with outside firms such as TSMC to actually manufacture its chips.
Microsoft (MSFT) is a tech giant that creates everything from software to hardware and more. This is important because not only does it help companies with exploration of minerals, it relies on them just as much. Microsoft is a company that is also going above and beyond in its emissions goals, aiming to be carbon neutral in the next ten years. A feat that will not be an easy task for such a massive technology corporation. Why does that matter in the lithium race? Because the green energy boom will be destroyed without the vital metal
That’s why Bill Gates’ tech giant has made numerous investments in clean energy across the globe. From Ohio to the Netherlands, Microsoft is pouring millions into solar and wind projects to not only help reduce its own carbon footprint but also help neighboring communities do the same.