As the global chip shortage stretches towards the two-year mark, manufacturers are pulling some unusual tricks to keep production lines moving. Carmakers are using semiconductors taken from washing machines, rewriting code to use less silicon, and even shipping their products without some chips while promising to add them in later. With the shortage of semiconductors now a new normal, everyone is being forced to adapt.
“There’s desperation in the market,” he says Bill Wiseman, a senior partner at the consulting firm McKinsey. “If you’re building a $ 350,000 mass spectrometer, and you can’t ship it because you don’t have a 50-cent chip, you’re pretty much willing to pay anything.”
McKinsey has tapped into the sense of urgency by creating a team dedicated to sourcing chips for the companies it consults for. Wiseman says the team will look beyond regular supply chains and has found much-needed chips in countries including Morocco, the Netherlands, and Japan. They have also been able to identify chips that may be slightly different from the ones originally called for. Manufacturers and brokers are, of course, able to charge a premium, and companies have little choice but to pay. “The chips are actually out there,” Wiseman says. “It’s just a question of finding and getting them.”
In some cases, this means taking desperate measures. Last month, Peter Wennink, CEO of the Dutch company ASML, which makes the complex machines needed to mint cutting-edge computer chips, revealed another eye-opening example. Wennink says one large industrial conglomerate had resorted to buying washing machines just to scavenge the chips inside them for its products.
The chip shortage was caused by several factors, including a rush to buy electronics needed to work from home in the pandemic, a hoarding of chips sparked by trade tensions between the US and China, and disruption to flow of components through a complex semiconductor supply chain distributed around the globe.
The crisis has highlighted how crucial semiconductors are to the economy and has shown how brittle many supply chains are. Industries that have been badly affected include consumer electronics, LED and other lighting, energy, and automotive. At the beginning of the pandemic, car makers halted production and canceled orders for chips, before being blindsided by an uptick in demand. Having fallen to the back of the queue for chip orders, auto firms have been struggling to catch up ever since.
Carmakers have taken to stripping features from vehicles rather than shut down production lines. Last September, Cadillac said it would remove the hands-free driving feature from some vehicles. In November, Tesla started selling cars without USB ports. And this May, Ford said it would ship some models without chips for noncritical features like heating controls and would have dealers add them at a later date.
Mike Juran, CEO of Altia, a company that makes software for building interfaces for cars and appliances, says many companies are rewriting their code so that it works with different chips or so that a single chip does double the work. In some cases, Juran says, companies are using chips that are as much as 10 years old. “They’re swapping out chips with what’s available,” he says. “We get them to go back to the old chips that were, like, sitting in warehouses, that weren’t cutting edge, but we can get the same GUI on there.”