Automakers to design own chips by 2025: Gartner

Semiconductor shortages and supply chain bottlenecks, coupled with an increasing push for electrification and autonomous driving capabilities, will drive half of the top 10 automotive original equipment manufacturers (OEM) to design their own chips by 2025, research firm Gartner predicts.

Semiconductor shortages throughout this year has curtailed vehicle production at many large manufacturers, including Volkswagen, Volvo and Renault.

Furthermore, the shift from internal combustion engine (Ice) vehicles to electric vehicles (EVs) requires more developed semiconductors that have advanced features. As chip makers are typically further removed from automakers' supply chain, they are slower to respond and adapt to any changes in demand.

"In most cases, chip makers are traditionally tier three or tier four suppliers to automakers, which means it usually takes a while until they adapt to the changes affecting automotive market demand. This lack of visibility in the supply chain has increased automotive OEMs' desire to have greater control over their semiconductor supply," research vice-president Gaurav Gupta said.

The ongoing shortage is for semiconductor technology node devices that are fabricated on smaller eight-inch wafers, for which capacity expansion remains difficult, Gartner said. As a result, shortages are likely to persist into next year.

Several automakers and semiconductor foundry companies have already announced plans to expand chip fabrication capacity.

Foundries such as TSMC and Samsung — who are jointly building a new chip fabrication plant in Japan in 2022 — have provided access to manufacturing processes, while other unnamed producers have given access to advanced intellectual property that make custom chip design accessible, Gartner said.

EV manufacturer Tesla has been designing its own chips since 2016 — having previously sourced them from US-based NVIDIA — and manufacturing them through a partnership with Samsung.

Last month, Ford Motor and US semiconductor manufacturer GlobalFoundries signed an agreement to boost chip supplies for Ford and the wider automotive industry.

Gartner also predicts that by 2025 the average sale price of new vehicles in the US and Germany will be over $50,000, which could flatten or even drag on the new vehicle market.

By Samuel Wood