According to GM, the ongoing semiconductor shortage has forced it to ship certain pickups without a fuel module they would otherwise carry. We’ve known automakers were having trouble sourcing necessary chips, but the decision to ship vehicles without a previously intended part is a startling acknowledgment of how semiconductor demand is warping the world.
Reuters reports that vehicles using a 5.3L EcoTec3 V8 with a six-speed or eight-speed transmission will have lower fuel economy by one mile per gallon. The EcoTec3 is reportedly rated for ~16 miles per gallon. Mathematically, it’s a 6.25 percent reduction. A little napkin math assuming 13,500 miles per year and $2.86 per gallon suggests the difference comes out to ~$161 per year in additional fuel costs.
We’re guessing that the chip in question is responsible for GM’s Active Fuel Management implementation. AFM allows an eight-cylinder car to turn itself into a four-cylinder vehicle when only being lightly driven.
GM was a bit cagey on exactly which models would be impacted. Spokeswoman Michelle Malcho stressed that GM was protecting the profitability of its pickup line and did not name the number of vehicles that would ship without this specific module. The change is only expected to run through the end of 2021. In car terms, that happens in the late summer or early fall. Even money on whether the change actually gets extended to 2022.
How’d We Get Here?
The semiconductor industry and the auto industry work on very different timelines. Auto manufacturing relies on just-in-time delivery (JIT). The semiconductor industry expects long lead times. TSMC and Samsung build different chips for different companies at different times of the year. Keeping a fab at full utilization requires careful scheduling, especially when ramping production ahead of a major smartphone launch.
GM and the other automakers cut their orders in the early part of 2020. When car demand re-emerged faster than expected, they attempted to book new orders with TSMC and Samsung only to discover that both companies had no capacity to spare. The auto manufacturers have accused foundries of playing favorites based on volume. The foundries have pointed to rabid consumer demand, the increased silicon required for 5G devices (up to 40 percent more), disrupted supply chains, and that the auto manufacturers refuse to maintain chip inventories.
The foundries seem to have the superior argument, but we need to acknowledge the scope of the problem. Yes, GM and other auto companies should maintain larger chip inventories as a buffer against disruption, but the scope and length of these shortages would have already exhausted any reasonable inventory.
It’ll be interesting to see if other car manufacturers follow GM’s lead on this. Estimates on when the semiconductor shortage will ease currently suggest Q3 or Q4. Dates fluctuate by industry and market. If you’re wondering if anyone actually has a clue or if everyone is just guessing, you are not alone.
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