In-house production of microchips the solution for EV makers to reduce supply risk

FRIDAY, JUNE 02, 2023

The acute shortage of microchips, which severely hampered production during the Covid-19 factory shutdowns, has prompted electric vehicle (EV) manufacturers to mitigate potential supplies risk by making their own chips to ensure they can meet rising demand for EVs.

The EV industry is emerging as a new competitive field, made up of old players transitioning from traditional fossil fuel vehicles to EVs as well as the entry of new players. This has intensified competition.

Leading automobile manufacturers are accelerating the development of in-house expertise for microchip sets instead of relying on suppliers, or subsidiary suppliers. This indicates a fundamental change in the core capabilities of car manufacturers. In the past, companies like Volkswagen (VW), GM, and Toyota focused more on the final assembly aspects.

Hence, the biggest challenges for the EV industry are with regards to the technological aspects. This year, new manufacturers in the electric vehicle industry still face unpredictability in the supply of microchips. It's not only EVs that require microchips, but also the rapid growth of new technology introductions such as AI, cloud computing, Internet of Things, and 5G or 6G. This competition for microchips has often led microchips factories to operate at near maximum capacity.

The transition phase in the EV automotive industry continues to evolve amid intensifying competition as EV manufacturers strive to mitigate potential supply chain risks that can adversely affect their business.

Meawhile, Tesla continues to maintain its top position, as seen from its increasing revenue and profits, despite higher competition pressure, including from BYD, the second-largest Chinese car manufacturer, that is fast catching up. The factors driving this intensified competition are the abilities to produce both batteries and microchips.