Chip scarcity brings tech companies and automakers closer together

Because of a chip scarcity and the awareness that automobiles are becoming increasingly digital, collaboration between chip firms and the automotive sector is picking up speed.
Chip scarcity brings tech companies and automakers closer together

Because of a chip scarcity and the awareness that automobiles are becoming increasingly digital, collaboration between chip firms and the automotive sector is picking up speed.

After more than a year of the crisis, officials from automobile and chip companies are forging stronger links to overcome the shortage and collaborate on new product introductions. Executives from chip companies such as Intel Corp. INTC 2.14 percent, Qualcomm Inc. QCOM 0.51 percent, and Nvidia Corp. NVDA -1.45 percent flocked to Munich last week for an annual auto show, luring them with the promise of selling chips for new car displays, driver-assistance features, and other vehicle applications.

The chip crisis underlined how reliant carmakers have grown on chips, but Intel CEO Pat Gelsinger told car industry leaders at the event on Tuesday that the auto sector's thirst for CPUs is making it a more crucial client segment for chip firms. By 2030, chips will account for a fifth of the cost of materials used in premium-segment vehicles, up from 4% in 2019.

Even as automobiles have become more chip-equipped in recent years, the interaction between automakers and chip manufacturers has remained mostly indirect. To obtain the chips that their cars need, car manufacturers primarily relied on their parts sellers. According to automobile and semiconductor industry leaders, this mismatch contributed to the recent chip problem in the auto sector. Officials in the business are now claiming that such links are being reestablished.

The implementation of ultrafast 5G communications networks, according to Cristiano Amon, CEO of Qualcomm, would help allow new automobile features, including the deployment of self-driving cars, he stated Wednesday in Munich. “All car businesses should be viewed as technology companies and part of the IT sector,” he added. He went on to say that automakers must have close links to tech businesses.

Earlier this week, Qualcomm said that its processors will power infotainment systems in Renault SA's RNO 2.61 percent new electric vehicles. In January, the chipmaker and General Motors Co. agreed to expand their collaboration on digital cockpit and driver-assistance technologies. Qualcomm began a $4.6 billion offer for Swedish auto-technology company Veoneer Inc. last month, indicating the corporation's interest in the industry.

According to analysts, the chip and automobile sectors' reliance would only grow. The automotive chip industry is expected to be worth over $85 billion in 2027, up from around $52 billion this year, according to research firm IHS Markit Ltd.

Unlike more established semiconductor sectors, the automotive sector offers significant expansion prospects for chip companies, according to Phil Amsrud, an IHS auto expert. He claims that new phone sales are mostly driven by individuals replacing old phones, while the number and sophistication of chips used in automobiles is increasing.

Mr. Gelsinger said at the vehicle event that Intel would launch a robotaxi service based on its Moovit mobility software, which it bought for $900 million a year ago, and Mobileye's self-driving technology, which it invested $15 billion in four years ago. Mobileye, an Israeli autonomous-driving business, provides technology for driver-assistance features to renowned automakers such as BMW AG and Ford Motor Co.

Mobileye said this week that it will perform an autonomous-taxi service trial in Munich next year in collaboration with European rental-car operator Sixt SE. Sixt will maintain the autonomous automobiles, which will be owned and supplied by Mobileye.

With the line between automobiles and technology blurring, Ford announced last week that it has hired Doug Field, a former Apple Inc. and Tesla Inc. executive, as its chief advanced technology and embedded systems officer. Field will report directly to Ford CEO Jim Farley.

In an effort to advance its own driver-assistance technology, Tesla announced last month that it is building a supercomputer in-house to conduct the computations needed to train the software for its vehicles.

Nvidia, the largest chipmaker in the United States, is wagering that automobiles will become a growth center. Nvidia's vice president of automotive, Danny Shapiro, reportedly stated that the company's auto-business pipeline is worth $8 billion over the next six years.

However, for the time being, carmakers' primary concern is the scarcity of chips for the current generation of automobiles. After effectively weathering the early stages of the crisis, Toyota Motor Corp. announced last month that it would idle more than a third of its plant capacity as it dealt with chip concerns.

The chip scarcity might be severe for another year, according to BMW CEO Oliver Zipse, and Volkswagen AG CEO Herbert Diess has warned that the auto sector will face chip shortages for years.

Chipmakers are reacting in order to alleviate the suffering. Intel announced on Tuesday that it would devote some manufacturing capacity at its Irish plant to the automobile industry. Robert Bosch GmbH and Infineon Technologies AG are both boosting capacity in response to the demand.