Automakers effectively pulled the rug out from under their chip suppliers by asking them to severely cut production, then turning around and asking for a lot more than their original quantity. In general, those suppliers canceled their supply capacity with their factory partner, so when automakers turned around and placed new orders, those factories already sold $xx months of that factory time to someone else, making it hard for the semiconductor manufacturers to get back to their own production capacity and fulfill the auto industry’s orders.
Somebody at a major chip company told me that they went looking for, and found, new customers after the automotive customers canceled their orders.
So not only did the car companies ordered more than before after they realized that demand was not dropping, even if demand for them had returned to what it used to be, the total demand from other customers is now higher too.
TAM for semiconductors turned out to be wayyyyyy bigger than the world's manufacturing capacity for semiconductors. I don't know how this caught manufacturers by surprise, but perhaps there's bottlenecks in talent, supporting industry and infrastructure that I'm not aware of that would have made additional expansion difficult previously.
Seems like we are dealing with the opposite issue here where factory production is booked many months in advance and can’t quickly adapt to new demand.
Neither JIT nor many other things factors in "global pandemic," but proper JIT that knows how to scale up/down theoretically could handle things, its just the human element that fucks up the system. Yeah beancounters are beancounters but trying to blame JIT is really off course.
I disagree, respectfully. Not that I think everyone should inventory a year of everything. But the ethos of JIT is that you can treat your supply chain as if it’s infinite, and this keep it close to your projections.
Automotive got hit especially hard since any feature that requires electrics has the microprocessor embedded in that feature. Very cost effective-you don’t ship extra cpu power for unused features.
Tesla did the opposite though—centralized processing and over allotted cpu cycles by also made it easy to upgrade via software only.
The claim is more that they are bad planners, orthogonal from whether they use JIT or not.
They're not doing proper supply management. You can do proper supply management with JIT or without JIT. You can also do improper supply management with JIT or without JIT.
For it to be "no true scotsman" they would have to be claiming that "doing JIT" is a solution to supply management. And they're not claiming that.
I guess you are partly right, but parent said "proper JIT" would work well without any evidence to what that means. Surely not everyone is doing the "improper" JIT.
I remember reading somewhere that automakers trying to get the governments involved to have them to lean on the chip suppliers to give the automaker the highest priority over other clients.
Why isn’t the result of those actions that those auto manufacturers either pay more or go without, rather than every buyer paying more and/or going without?
Because all capacity is being used. So it's not that today's capacity costs more (this capacity was sold and paid for months/years ago), it's future capacity that costs more. Until there are more chip factories, this is going to be an ongoing problem for the chip industry.
> Automakers effectively pulled the rug out from under their chip suppliers by asking them to severely cut production
Automakers only make few percents of MCU market. Just the most profitable one. Plus, a lot of MCU makers have own fabs.
It's very unlikely they took "months" of factory output. They just got their small batches to wait until the tsunami wave of mainstream part runs is done.
No, they're just being short-sighted and revenue-first. Think about how the rental car companies sold their idle car stocks and now can't rent cars reliably to anyone.
That's what happened, but faced with insolvency, you gotta do what you gotta do. You might really need those cars, but if selling it is the only way you'll make rent and payroll for the month, you gotta sell the cars. It's not a matter of short vs long term thinking, it's a matter of bankruptcy!
https://www.freep.com/story/money/cars/2021/06/15/car-chip-s...