Ford Announce Plans in Tackling Global Chip Shortage, to Deal Directly with Foundries?

It is known that the world is facing a global chip shortage, due to demand for semiconductors spiking beyond its capacity for supply. This has affected companies in many industries, with carmakers enduring the worst of it.

News has reported that the production of both the Ford Mustang and Bronco will be impacted. To resolve the issue, Ford’s chief executive officer Jim Farley announced several strategies - including a plan to redesign components in making them more compatible with more widely available chips, as well as considerations of dealing directly with foundries. 

Even though these strategies might go against the conventional way of dealing with suppliers rather than the makers of the chips, it is seen as a preventive measure when this dire situation happens again in the future. 

"Not only are we redesigning a lot of our components to work with chips that are more accessible… but we think we need to look at buffer stocks, actual direct contracts with some foundries," said Farley.

Around 60 percent of the chips used in Ford cars were 55-nanometer in size or larger, which are the chips that are short in supply. 

Previously, Ford had to cease production of its F-150 truck. The company expects that the ongoing shortage will halve production rates this quarter, resulting in a cost of $2.5 million (approximately RM10 million). 

Among other brands affected by the shortage are Volkswagen, which was said to be affected recently. As of the first quarter, the company had to cut vehicle production by 100,000 units because of the shortage. It is also rumoured that Volkswagen is in the process of direct talks with chip manufacturers similar to Ford.