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Shortage Of Computer Chips Forces Automakers To Curtail Production

RACHEL MARTIN, HOST:

Automakers are shutting down plants, cutting worker pay and disrupting supply chains. Some new cars already in short supply might get even harder to find. Here's General Motors' chief financial officer, Paul Jacobson, on an earnings call Wednesday.

(SOUNDBITE OF ARCHIVED RECORDING)

PAUL JACOBSON: We do expect some choppiness in the near term.

MARTIN: In fact, GM is bracing for $2 billion in lost profit. NPR's Camila Domonoske explains that it all comes down to a massive shortage of computer chips.

CAMILA DOMONOSKE, BYLINE: A new car has computer chips in all the obvious places, like, say, a fancy touch screen. But they're also tucked in some not-so-obvious places, like inside the engine.

CHRIS PAREDIS: Oh, engines actually have very sophisticated algorithms.

DOMONOSKE: Chris Paredis is a professor at Clemson University. He starts to run through a list of everywhere chips can be found.

PAREDIS: Suspension, braking, entertainment systems, of course.

DOMONOSKE: The steering, the seats.

PAREDIS: To detect whether somebody is sitting on them.

DOMONOSKE: Even the tires.

PAREDIS: It just measures the pressure of your tires.

DOMONOSKE: It adds up. A high-end car can have a hundred separate little computers using a thousand different semiconductors.

KATRIN ZIMMERMANN: It's such a small, little thing. But if it misses, you can't drive the car - right? - or it doesn't brake or the windows don't pull or all of these things.

DOMONOSKE: Katrin Zimmermann is the managing director of TLGG Consulting. Right now, there just aren't enough of these chips to go around. And missing even one can keep a car from rolling off the production line. Companies around the world are feeling the hit. GM shut down some plants through March. Ford had to curtail production of its top moneymaker, the F-150. This problem is really borne out of a success story. Because of the pandemic, automakers canceled some of their orders for computer chips. Then they started selling a lot more cars than they expected. But when they tried to place new orders, they found chipmakers had sold their chips for the next year because of soaring demand for laptops and phones and gaming systems.

JODI SHELTON: It was already at 100%.

DOMONOSKE: Jodi Shelton is the CEO of the Global Semiconductor Alliance, a trade group.

SHELTON: Unfortunately, what that means is that 2021 is spoken for. I mean, there's nothing that is going to happen on the capacity side that is going to make things any better.

DOMONOSKE: Semiconductor manufacturers could switch back to making chips for cars. But even that would take months and could create new shortages for, say, phone manufacturers. Meanwhile, this shortage has brought new scrutiny to the concentration of semiconductor factories in Asia, particularly Taiwan. That's led to some calls for more capacity in the U.S. and Europe. But building new plants would take years. In the near term, it might just take time and cooperation to balance supply and demand.

WILL CHU: It's a global phenomenon. The semiconductor business is a global industry, right? So I think there'll, generally speaking, be a global solution.

DOMONOSKE: Will Chu runs the automotive business unit at the U.S. semiconductor company Marvell. He says semiconductors are really important in today's vehicles but have often been overlooked.

CHU: I've been doing this for a long time, like I said, more than a decade. And so nobody - (laughter) nobody really cared before, to be honest.

DOMONOSKE: Right now, in the auto industry, everybody cares about semiconductors.

Camila Domonoske, NPR News.

(SOUNDBITE OF FRAMEWORKS' "DELPHINA") Transcript provided by NPR, Copyright NPR.