An analyst at International Data Corporation said the global chip shortage will continue and consumers will pay for it.
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General Motors signed a long-term agreement with Global Foundries To set up exclusive production capacity of US-made semiconductor chips, the companies announced on Thursday.
The deal, which they’re calling an industry first, comes as automakers continue to battle through supply chain problems, including a Year-long global shortage of semiconductor chips It has sporadically disabled factories covid pandemic,
The chip maker will set up dedicated production capacity exclusively for the Detroit automaker’s key auto suppliers at its semiconductor facility in upstate New York, according to the companies.
“The supply agreement with GlobalFoundries will help establish a strong, flexible supply of critical technology in the U.S. that will help GM meet this demand, while providing our customers Will provide new technology and facilities. procurement and supply chain, said in a statement.
The deal is a victory for the Biden administration, which has been pushing companies to reestablish US production of semiconductor chips, including the CHIPS Act. Signed into law in August.
Parks said GM expects the use of semiconductors to more than double over the “next several years” as it increases technological capabilities in its vehicles, particularly all electric cars and trucks Requires more chips than conventional vehicles.
The companies declined to disclose details such as the cost and amount of additional capacity. They expect the deal will enable higher volume chip production and “maximize superior quality and predictable, high value material creation for the end customer,” according to the release.
The exclusive production of chips for GM will be an expansion of the New York-based company’s operations, according to GlobalFoundries CEO Thomas Caulfield.
According to Caulfield, this deal could be a blueprint for other deals for GlobalFoundries. It provides the best economics for both companies and a road map for the future materials needed to produce chips.
“This is the first deal of its kind, not the last of its kind. It’s a solution to a problem,” he told CNBC. “We believe this is a framework for others to benefit from as well.”
Caulfield said it expects to take two to three years before GM’s specialty production really ramps up.
Automakers have historically not worked directly with chip suppliers. Instead, allow your big auto suppliers to handle such negotiations. However, the shortage of semiconductor chips is causing companies like GM to reach further down their supply chain In an effort to better protect the parts of your vehicles.
Semiconductor chips are extremely important components of new vehicles for areas such as infotainment systems and more basic parts such as power steering and brakes. Depending on the vehicle and its options, experts say there could be hundreds of semiconductors in a single vehicle. Higher-priced vehicles with advanced safety and infotainment systems have much more than the base model, including a variety of chips.
The origin of the chip shortage dates back to early 2020 when vehicle assembly plants were shut down due to COVID. As facilities closed, wafer and chip suppliers shipped parts to other sectors such as consumer electronics, which were not expected to be hurt by stay-at-home orders.
Correction: The origin of the chip shortage dates back to early 2020. The previous version got the time wrong.