Ford Announces Partnership to Assure Steady Flow of U.S.-Made Chips – The New York Times

With increasingly sophisticated cars devouring more and more computing power, a shortage of semiconductors has vexed automakers and disrupted production around the world.

Ford Motor moved Thursday to address that challenge, announcing a collaboration that could give the company more control over both the supply and the design of its chips — the brains needed to control engines, transmissions, brakes, infotainment systems and more.

Ford said in a statement that it had signed a nonbinding agreement with the U.S.-based semiconductor supplier GlobalFoundries to collaborate on developing chips for Ford vehicles, and that the companies would explore expanding domestic chip production.

Chuck Gray, Ford’s vice president for vehicle embedded software and controls, said that even with the new partnership, the automaker expected chip supply to remain uneven for some time. “We still think there’s going to be fits and starts going into next year,” he said.

But he added that working with GlobalFoundries should enable Ford to start having a hand in designing some of its own computer chips.

Until recently, many auto components could easily be controlled by generic computer chips. But that is no longer the case, as manufacturers add increasingly complex features such as battery monitoring, advanced driver-assistance systems and networking services.

“Computing power is the new horsepower,” Mr. Gray said. “The demand for computing power is now so high, and we’ve got to have the right chips doing the right things.”

In recent years, U.S. automakers have hired thousands of software developers and programmers. Mr. Gray said Ford was now looking to bring on chip designers as well. “In the near future, we will be building that out,” he said.

General Motors, too, is taking steps to get a better handle on the development and availability of chips. G.M.’s president, Mark Reuss, said Thursday that the company expected the number of semiconductors used in vehicles to double over the next few years. As a result, he said, G.M. is working with chip companies to develop three types of microprocessors to handle almost all of its computing needs.

The moves are part of a strategy to reduce the number of varieties of chips by 95 percent and should help increase chip supply while cutting costs significantly, Mr. Reuss said at an automotive technology conference held by Barclays, the investment bank.

“We’re going to lead the industry with this,” he said. “And this will drive quality and predictability.”

To ensure a supply of new chips made with an energy-efficient material called silicon carbide, G.M. reached a deal last month with Wolfspeed, a company formerly called Cree that is building a factory in New York State.

Mr. Reuss said G.M. was talking with many major suppliers to secure enough chips to keep its factories running. The shortage of chips and the rolling production stoppages at auto factories have left auto dealers with tight supplies of new vehicles on their lots.

Both Ford and G.M. reported that new-vehicle sales fell by about a third in the United States in the three-month period that ended in September, denting their earnings.

Mike Hogan, a GlobalFoundries senior vice president in charge of its automotive business, said the discussions with Ford initially focused on securing key chips for current car production. But the talks broadened to touch on other areas, including allowing Ford to get early input into chip production processes that could shape features such as the driving range of electric vehicles.

“Traditionally there were many players between ourselves and someone like Ford,” Mr. Hogan said. The automaker’s move to get more involved in shaping chip technology “is a great example of the kinds of changes you are going to see,” he said.

The other issue is where future parts will be made. Most cutting-edge chips are produced by Taiwan Semiconductor Manufacturing Company, which is by far the biggest contract chip manufacturer, or foundry. But shipment interruptions from Asia because of the pandemic have made politicians worry about reliance on factories in Taiwan, especially in view of China’s territorial claims over the island.

So the Senate has overwhelmingly approved a $52 billion package of subsidies aimed at encouraging the construction of more chip factories in the United States, though that funding has been caught up in partisan battles in the House.

GlobalFoundries was formed in part through acquisitions of plants formerly owned by the chip maker Advanced Micro Devices, also known as AMD, and IBM. It had an initial public offering of stock in October and is investing heavily to expand its output.

Although it is 89 percent owned by the government of Abu Dhabi, GlobalFoundries makes classified chips for the Pentagon in factories in Vermont and upstate New York. It has a high-volume plant near Albany, N.Y., whose output it plans to double, hopefully with the aid of grants from the congressional funding package if it is approved, Mr. Hogan said.

Producing chips in America, he said, was definitely part of the Ford relationship. “There is an aspect that says, ‘While we are reinventing how we source semiconductors, let’s also solve another problem by having more of it onshore.’”

The supply chain in the $500 billion semiconductor industry is extremely complex, particularly for chips used in cars. Key suppliers include NXP Semiconductors and STMicroelectronics in Europe, Renesas Electronics in Japan, and Onsemi and Microchip Technology in the United States. Those companies own factories to make some chips they design, but they also subcontract some of the manufacturing.

Automakers have historically relied on an additional intermediary group of so-called Tier 1 companies that buy chips to design modules to handle particular functions in cars, such as controlling engines and transmissions.

Handel Jones, who heads the chip consultancy International Business Strategies, says he has been advising carmakers to take a page from fast-moving Silicon Valley companies like Apple, which designs some of its key chips and consults other companies on both design and manufacturing.

“They will go to the foundry vendors to make sure that capacity is protected,” Mr. Jones said in a recent interview.

Infineon Technologies, a chip maker based in Munich that is a leading supplier to the auto industry, has partnerships with Volkswagen and Hyundai to develop semiconductors that increase the range and reduce the charging time for electric vehicles. It is also among the chip makers working with General Motors.

Ford and GlobalFoundries said they planned to continue discussions about specific ways to increase chip output in the United States. They declined to elaborate or say if Ford might invest in a new semiconductor factory with GlobalFoundries.

Thomas Caulfield, the chief executive of GlobalFoundries, said the agreement would foster innovation and “ensure long-term supply-demand balance.”

The auto industry’s chip shortage stems from the beginning of the pandemic, when auto plants closed for about two months to prevent the spread of the coronavirus among workers. At the same time, sales of computers and game consoles soared and tech companies increased semiconductor orders. When automakers resumed production, chip suppliers had little capacity available for them.

Ford was particularly hard hit earlier this year because a chip plant owned by one of its key suppliers was shut down by a fire. In the second quarter, it was able to make only about half as many vehicles as it had originally expected, although its supply of chips has steadily improved since then.

Jack Ewing contributed reporting.

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