Stellantis CEO Says Chip Shortage Nowhere Near Ending

Matt Posky
by Matt Posky
stellantis ceo says chip shortage nowhere near ending

Stellantis CEO Carlos Tavares has suggested that the global semiconductor shortage will persist through 2023.

“The situation will remain very complicated until the end of 2023, then will ease a little,” he told French outlet Le Parisien over the weekend, adding that “semiconductor manufacturers have an interest in making business with us again, especially as they’re raising prices.”


It’s not great news for car shoppers who have been waiting for a more favorable market to buy from and mimics some of the language floated by a few other auto executives, despite analysts looking torn on whether or not the issue could be resolved by the end of 2022. However, Citroën and Peugeot (both Stellantis properties) still seem to be suffering rather badly. Whereas domestic nameplates seemed to have it the worst in the early days of the shortage (e.g. Ford, Chevrolet, Jeep), some of the strife seems to have migrated to Europe since then.


But let’s take a step back to discuss how we got here and whether or not Stellantis’ problems are unique, or just another aspect of the overarching industrial nightmare in which we’re currently living.


Asian suppliers were already seeing production hardships due to raw material shortages dating back to 2019. Prior to that, there were some minor upsets stemming from the U.S.-Chinese Trade War. But the bad times didn’t really kick off until world governments began imposing manufacturing restrictions in response to COVID-19. This is the finger that pushed over the first domino, with cascading and continued supply chain disruptions being the end result.


By April of 2020, automotive production had ground to a halt, dealers had closed their doors, and almost everyone had stopped buying new cars. However, the semiconductor industry was already reeling from the aforementioned issues and noticed that smart devices, tablets, phones, and other small electronics were still being purchased by people now stuck indoors. Manufacturers chased the money and fewer chips were reserved for the automotive sector – which set the stage for all-new problems when vehicle production resumed.


Unfortunately, chip producers had just spent the majority of their year idle and had to rush to navigate increased pressure from various business sectors that were all undergoing similar hardships. But not before several semiconductor firms suffered disasters that resulted in further setbacks. In 2020, the Japanese-based Nittobo and Asahi Kasei Microdevices (AKM) both endured fires that impacted the industry’s ability to manufacture chips at the desired scale.


The following year would also see the Renesas Electronics Corporation suffering prolonged blackouts, followed by a fire of its own. At the same time, Texas power outages (stemming from winter storms) prohibited domestic chip production for Samsung, Infineon, and NXP. Later in 2021, Germany and its neighbors would likewise see limited access to energy – stifling chip production at Bosch, GlobalFoundries, and Infineon.


But it doesn’t end there. China, which is responsible for a lot of the older semiconductor technology used around the world, began implementing widespread, government-mandated energy reductions that would negatively impact supply chains by September of 2021. This overlaps with sustained lockdowns and a period of drought (limiting hydroelectric power) in some regions, while other parts of Asia were flooded by typhoons. And the situation hasn’t gotten much better in 2022, with Europe and China seeing worsening energy constraints going into the winter months.


Considering all of the above, it’s easy to see why automotive executives don’t expect things to improve until 2024. However, that doesn’t excuse the automotive sector’s inability to address the broader problem. By outsourcing such a large amount of its manufacturing requirements, the industry has found itself in real trouble. With the notable exception of Tesla, production targets have been absolutely unreachable for automakers. But even the United States’ purveyor of premium EVs had to admit that its third-quarter sales weren’t quite what was expected. Tesla leadership attributed the shortfall to deliveries that “lagged way behind production due to logistic hurdles.”


You’re probably assuming that chip producers will simply do what they can to increase their output, especially since the demand is obviously there. But you’d be forgetting that the entire global economy just spent nearly three years figuring out how to maximize profitability under diminished production schedules. For many business sectors lacking substantial organic competition, it may not be in their best financial interest to redouble their efforts.


Last month, Intel CEO Pat Gelsinger told Fortune that the semiconductor industry had already transitioned to newer chips and had little interest in going back to building the older ones used by the automotive sector. His reasoning was purely financial.


“It just makes no economic or strategic sense,” Gelsinger said from the floors of the German International Motor Show – an event he allegedly came to just to convince carmakers to run with newer chips. “Rather than spending billions on new ‘old’ fabs, let’s spend millions to help migrate designs to modern ones.”


The Intel executive claimed that few established suppliers are going to want to take the risk of diving back into older technologies that run the risk of being phased out in a few years. This was something Enrico Salvatori, president of Qualcomm Europe, appeared to agree with. He similarly alleged that suppliers aren’t going to want to backtrack and run with contracts for older hardware.


“For the foundries, investing in the old technology is much less attractive, because sooner or later there will be a migration to the new technology,” Salvatori explained.


But the cars of today still need those older chips. In most cases, a model cannot simply be updated to accommodate the newer equipment. The cost of such an endeavor is also likely to be exceptionally high and ultimately not worth it to automakers. Mr. Salvatori made no bones about this and said he is actively working with the car industry to accelerate the transition. But it’s going to be easier said than done.


“The new technologies are not pin-to-pin compatible, it’s not plug and play,” he said. “You have to redesign the circuit, build a new board that might have to be re-certified; maybe there’s some impact on the mechanical side that then could affect the car’s chassis. So there is a domino effect of action needed.”


So, in addition to supply chain constraints that seem to reemerge whenever any improvements are seen, some of the biggest players in the semiconductor industry no longer want to build the kind of chips the automakers want. Frankly, it’s starting to feel like nobody even wants to fix this problem – practically ensuring that supply chain constraints will persist well into the future. The only real silver lining is that the United States now realizes that roughly 75 percent of the chip industry is located in Asia and has taken steps to try and localize production via a sizable investment into new factories from Intel and the Taiwan-based TSMC. However, neither of those plants is likely to come online until 2024.


[Image: MZinchenko/Shutterstock]

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  • BSttac BSttac on Oct 04, 2022

    Trillion dollar corps acting like they can't do anything about "chip shortage" for years now. If it affected there bottom line more than the consumer they would have built a plant already. They just keep jacking prices up while making less product. Win win for them

  • Jim lawson Jim lawson on Oct 10, 2022

    A chip shortage is their excuse for not building cars? The reason noone is building cars right now is because they dont want the used gas engine cars competing with the new electric vehicles their going to force on to you.Theyll have the chips to make as many of those as you need. They shouldnt be allowed to lie to people like they are.

  • Jwee More range and faster charging cannot be good news for the heavily indebted and distracted Musk.Tesla China is discounting their cars. Apart from the Model 3, no one is much buying Tesla's here in Europe. Other groups have already passed Tesla in Europe, where it was once dominant.Among manufacturers, 2021 EV sales:VW Group 25%, Stellantis at 14.5%,Tesla at 13.9%Hyundai-Kia at 11.2% Renault Group at 10.3%. Just 2 years ago, Tesla had a commanding 31.1% share of the European EV marketOuch. https://carsalesbase.com/european-sales-2021-ev/@lou_BC, carsalebase.com changed their data, so this is slightly different than last time I posted this, but same idea.
  • Varezhka Given how long the Mitsubishi USA has been in red, that's a hard one. I mean, this company has been losing money in all regions *except* SE Asia and Oceania ever since they lost the commercial division to Daimler.I think the only reason we still have the brand is A) Mitsubishi conglomerate's pride won't allow it B) US still a source of large volume for the company, even if they lose money on each one and C) it cost too much money to pull out and no one wants to take responsibility. If I was the head of Mitsubishi's North American operation and retreat was not an option, I think my best bet would be to reduce overhead by replacing all the cars with rebadged Nissans built in Tennessee and Mexico.As much as I'd like to see the return of Triton, Pajero Sport (Montero Sport to you and me), and Delica I'm sure that's more nostalgia and grass is greener thing than anything else.
  • Varezhka If there's one (small) downside to the dealer not being allowed to sell above MSRP, it's that now we get a lot of people signing up for the car with zero intention of keeping the car they bought. We end up with a lot of "lightly used" examples on sale for a huge mark-up, including those self-purchased by the dealerships themselves. I'm sure this is what we'll end up seeing with GR Corolla in Japan as well.This is also why the Land Cruiser has a 4 year waitlist in Japan (36K USD starting MSRP -> buy and immediately flip for 10, 20K more -> profit) I'm not sure if there's a good solution for this apart from setting the MSRP higher to match what the market allows, though this lottery system is probably as close as we can get.
  • Jeff S @Lou_BC--Unrelated to this article but of interest I found this on You Tube which explains why certain vehicles are not available in the US because of how the CAFE measures fuel standards. I remember you commenting on this a few years ago on another article on TTAC. The 2023 Chevrolet Montana is an adorable small truck that's never coming to the USA. It's not because of the 1.2L engine, or that Americans aren't interested in small trucks, it's that fuel economy legislation effectively prevents small trucks from happening. What about the Maverick? It's not as small as you think. CAFE, or Corporate Average Fuel Economy is the real reason trucks in America are all at least a specific dimension. Here's how it works and why it means no tiny trucks for us. https://www.youtube.com/watch?v=-eoMrwrGA8A&ab_channel=AlexonAutos
  • Gabe A new retro-styled Montero as their halo vehicle to compete against the Bronco, Wrangler and 4Runner. Boxy, round headlights like the 1st generation, two door and four door models, body on frame.A compact, urban truck, Mighty Max, to compete against the Maverick. Retro-styled like the early 90s Mighty Max.A new Outlander Sport as more of a wagon/crossover to compete against the Crosstrek and Kona. Needs to have more power (190+ HP) and a legit transmission, no CVT.A new Eclipse hybrid to compete against the upcoming redesigned Prius. Just match the Prius's specs and make it look great.Drop the Eclipse Cross, I am not sure why they wanted to resurrect the Pontiac Aztec. Keep the Mirage and keep it cheap, make the styling better and up the wheel size. The Outlander seems fine.I like the idea of some sort of commercial vehicle, something similar in size to the Promaster City but with AWD.
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