BMW Chief Sees Global Chip Crisis Easing Within Next Two Years

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BMW AG’s Chief Executive Officer, Oliver Zipse, expects the global shortage of semiconductors hindering automotive production to be resolved “within two years” as companies and governments zero in on the issue.

“There’s intense focus on the issue globally, so it’s to be expected for supply and demand to be back in balance within two years at the latest,” Zipse said in an interview Thursday at the company’s driving academy near Munich, according to Bloomberg.

2019 IAA Frankfurt Auto Show, Press Days
2019 IAA Frankfurt Auto Show, Press Days
Oliver ZipsePhotographer: Sean Gallup/Getty Images

Just as demand picked up in major economies that are seeing their pandemic restrictions easing, a lack of chips used in everything from navigation systems to certain rear-view mirrors has forced carmakers to cut back on crucial production. While American multinational automaker, Ford Motor Co., last month estimated that the semiconductor shortage will slash earnings by $2.5 billion this year, BMW has only reported limited stoppages at two European plants thus far.

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The global shortage that was caused due consumers snapping up electronic gadgets en masse while confined at home has put in motion broad efforts to boost production. By 2030, the European Commission plans to double the bloc’s chip production to at least 20% of world supply. Such a move would reduce the bloc’s reliance on foreign companies for the critical components.

On the other hand, U.S. President Joe Biden has vowed to better secure America’s supply chain by reviving domestic chip manufacturing. Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest chipmaker, will spend as much as $28 billion on new plants and equipment this year.

From Horsepower to Chip Power

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Modern cars are relying more on electronics that include semiconductors

Source: IHS, Deloitte analysis
Note: Forecasts as of April 2019.

While waiting for the investment programs put in place to gather pace, manufacturers have had to idle plants or take the unusual step of stripping certain high-tech features from select models. Zipse said BMW has no plans to seek new partnerships or joint ventures despite current restraints.

“For critical components, we’ll stick with long-term supply contracts and a range of different partners,” he said. This will include battery cells critical to accelerating the German automaker’s rollout of EVs. “From our point of view, we’ve covered the necessary supplies with long-term contracts.”

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