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Tech.war against china backfires on automakers



 Automakers round the world are shutting assembly lines due to a worldwide shortage of semiconductors that in some cases has been exacerbated by the Trump administration’s actions against key Chinese chip factories, industry officials said.

The shortage, which caught much of the industry off-guard and will continue for several months, is now causing Ford Motor Co, Subaru Corp, and Toyota Motor to curtail production in the United States.

Automakers affected in other markets include Volkswagen, Nissan Motor, and Fiat Chrysler Automobiles.

The problems stem from a confluence of things as auto manufacturers compete against the sprawling consumer industry for chip supplies. Consumers have stocked abreast of laptops, gaming consoles, and other electronic products during the pandemic, creating tight chip supplies throughout 2020.

They have also bought more cars than industry officials expected last spring, further straining supplies.

In a minimum of one case, the shortage ties back to President Donald Trump’s policies aimed toward curtailing technology transfers to China.

One automaker moved chip production from China’s Semiconductor Manufacturing International, or SMIC, which was hit with United States government restrictions in December, to Taiwan Semiconductor Manufacturing Co in Taiwan, which in turn was overbooked, an individual conversant in the matter told Reuters.

An auto supplier confirmed TSMC has been unable to stay up with demand.

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“The systemic aspect of the crisis is giving us a headache,” said a supplier executive, who asked to not be identified. “In some cases, we discover substitution parts that would make us independent from TSMC, only to get that the choice wafer manufacturer has no capacity available.”

TSMC and SMIC didn't immediately answer requests for comment.

On an earnings call with investors Thursday, TSMC Chief Executive C.C. Wei said there was a shortage of automotive chips made with “mature technology” which it's working with customers “to mitigate the shortage impact.”

It only takes the tiniest of chips to throw off production: a Ford plant in Kentucky that creates the Escape sport utility vehicle vehicle idled due to a shortage of a chip in the vehicle’s brakes , a union official within the plant said.

Ford also will idle its Focus plant in Saarlouis, Germany, for a month starting next week due to chip shortages.

The situation is unlikely to enhance quickly, since all chips, whether bound for a laptop or a Lexus, start life as a silicon wafer that takes about 90 days to process into a chip.

The chipmaking industry has always strained to stay up with sudden demand spikes. The factories that produce wafers cost tens of billions of dollars to create , and expanding their capacity can take up to a year for testing and qualifying complex tools.

“The long and in need of it's , demand is up about 50%. And there’s no asset-intensive industry like ours that has 50% capacity lying around,” said Mike Hogan, senior vice chairman at chip manufacturer GlobalFoundries and head of its automotive unit.

Tight capacity and soaring demand have made it difficult for chip producers to soak up two shocks from the Trump administration.

First, the White House in September banned Huawei, the Chinese telecommunications giant, and a serious smartphone maker, from buying chips made with American technology. Huawei stockpiled chips before the ban so as to stay building what products it could after it took effect. And Huawei’s rivals, eyeing an opportunity to grab market share, started snapping up chips, analysts said.

Second, the United States government enacted rules that bar SMIC from using some US tools to form chips, a move that has prompted a minimum of a number of SMIC’s customers to seem for a special chip factory due to concerns that production might be disrupted.

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“There’s a fear of employing a Chinese chip factory if the us goes to place them on an entity list,” said Daniel Goehl, chief business officer of UltraSense Systems, referring to possible further restrictions.

A Department of Commerce spokesman declined to discuss the implications of the SMIC and Huawei blacklistings for the auto sector but said that the highest priority was “to make sure the Export Administration Regulation protects US national security, economic security, and policy interests.”

Analysts said the automotive chip shortage is probably going to persist for as long as six months. An AutoForecast Solutions report estimated the worldwide auto industry had already experienced a lost volume of 202,000 vehicles as of January 13.

Executives at automakers and suppliers said they're adapting production schedules to guard chips utilized in higher-profit vehicles. And companies are weighing sourcing chips from more suppliers and increasing inventory levels within the future.

“It’s four-dimensional chess all day long,” said one auto official, who asked to not be identified.

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