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Ford CEO Is Optimistic About the Global Chip Shortage That Crippled The Industry

Ford CEO Is Optimistic About the Global Chip Shortage That Crippled The Industry

It's kind of ironic that the Bronco's path to resurrection has been so bumpy and plagued with delays. Here, we have an eagerly awaited model that resurrects one of Ford's most respected nameplates, equipped with a specially-designed off-road chassis and suspension, as well as gorgeous retro styling and convincing on and off-road performance.

Even though we know how it looks, what features it will have, and even what aftermarket parts we can install on it, we're still unsure as to when we can buy it. Yes, as you probably know, the Bronco is in the midst of another delay, and this time the cause is the semiconductor chips that seem to be in short supply all across the industry. Right after Job 1, Ford announced that the Bronco assembly line would stop for a couple of weeks, due to the lack of chips needed to complete the production process.

What's Happening?

When the COVID-19 pandemic broke out in early 2020, global car manufacturers decided to stop production for two reasons. First, they wanted to protect their employees, and second, they realized that the demand for their products would plummet and dealers would be left with millions of unsold cars. 

This anticipated scenario actually ended up playing out, with new car sales numbers in April of 2020 plummeting by more than 50% globally. At the time, the decision to stop production looked like a smart move -- and circumstances have reinforced Ford's wisdom, but it also started a chain of events that lead to the current chip shortage.

Apparently, when major car manufacturers decided to put their factories on idle, global parts and components suppliers found themselves in a challenging position -- sitting on a sizable unsold stock of parts. Some companies chose to wait things out, but some, such as factories that produce electronic components, filled the void by supplying the consumer electronics sector.

As we know that the market went crazy for gaming consoles, computers, TVs, and tablets during the pandemic, this could be considered a smart move. However, in late 2020, when the global car market showed signs of recovery and car manufacturers restarted their production process at full speed, it became apparent that chip supplies would run low very quickly and that factories which produced those components would now be busy working in another sector. 

Why Are These Chips So Important?

In modern vehicles, electriconic chips control or monitor practically every process. From engine and suspension, to braking and steering, everything is electronically controlled. Not to mention infotainment systems and stability aids. You can't even open the door on most modern cars without a sensor noticing it and informing you via a light on the dash. Most modern cars feature up to 3,000 different chips installed throughout their architecture. As we know that the annual worldwide production of vehicles totals over 70 million units, we can conclude that the number of chips needed to complete them is measured in billions!

What's Next?

Even though the chip factories in Asia never entirely stopped production for automotive use, their outputs are only a fraction of what is needed to maintain a steady assembly of cars. They can't switch back to producing chips for the automotive industry, as they had before, because of the lucrative contracts with electronic companies signed during the pandemic.

At the moment, all major chip factories are working in three shifts to maximize production output, and several more facilities are under construction and planning to open later this year. Some car manufacturers even considered moving chip production in-house, but apparently, that would be too expensive and time-consuming, and it wouldn't provide any real advantages at this moment. Industry analysts expect that the supply of chips will be normalized by the end of the year, even though some electronic companies fear that it will be mid-2022 before seeing any real improvement.

Ford And the Chip Shortage

In a recent interview, Ford CEO Jim Farley optimistically announced that the company managed to offset most of the chip shortage and that the second half of 2021 would be business as usual for Ford. However, he also stated that the company faced big problems, since its supplier's factory in Japan burned down, requiring that Ford needed to decrease its production by 50% due to the resulting shortage from the fire. He also addressed criticism that GM handled the chip situation better than Ford. If you're interested in a full interview, here is the link.  

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