Automakers may turn to design chips in-house to rein in chip shortage issues: Gartner

The world’s largest auto companies may choose to design their own chips in order to tackle the ongoing semiconductor shortage worldwide. Market research firm Gartner predicted that 50% of the top 10 automotive original equipment manufacturers (OEMs) may design their own chips, in order to gain control over their product roadmaps and supply chains.

“Automotive semiconductor supply chains are complex,” said Gaurav Gupta, research vice president at Gartner. “In most cases, chip makers are traditionally Tier 3 or Tier 4 suppliers to automakers, which means it usually takes a while until they adapt to the changes affecting automotive market demand. This lack of visibility in the supply chain has increased automotive OEMs’ desire to have greater control over their semiconductor supply,” he added.

Further, the research firm said that car makers will also want to design their own chips to adapt to growing trends like electrification and autonomy. The semiconductor shortage is mostly in the advanced manufacturing nodes, like 8-inch wafers and below, since fab companies have difficulty scaling up production of those chips. “The fact that the automotive industry has been conservative in qualifying older devices on larger wafer sizes has also hurt them and will likely motivate them to take chip design in-house,” said Gupta.

Essentially, auto firms may adopt the same strategy used by large technology companies like Apple, Samsung and recently even Google, who have turned to designing their own chips. These firms tie up with foundry businesses from the Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung Semiconductors to produce chips designed by them.

According to Gartner, by 2025, the average sale price of new vehicles will increase to $50,000 (approx. Rs. 37 lakh) in the US and Germany. “This price acceleration will likely shrink the overall number of sales of vehicles and increase the market for parts and upgrades as people seek to keep existing vehicles on the road longer,” said Mike Ramsey, research vice president at Gartner.