So, hello and welcome everyone to the tech Summit of the Women's Tech Conference 2022. In this session, we will be understanding the mystery of the great chip shortage in the automotive industry.We'll try to understand how chip shortage really happened for the automotive industry and what does it take to manufacture semiconductor parts and what is being done to which the supply and demand gap? I'm your host and presenter, Namrita Sharma. I'm an analog design expert.

I'm an alumna of it, Delhi and G Ban University in India. I have about 17 years of experience in semiconductor trip design. A little disclaimer before we start on for the presentation is that all the data presented in the session is based on my understanding and data from public resources. They do not represent the views of my present employer or previous employers. So I'm sure everybody has heard of chip shortage. And if you have Google chip shortage over the past few um months, you would see news like this automakers slashing production due to chip shortage, automakers shutting down plants due to chip shortage and ultimately fall in sales and profits due to chip shortage So it's clear that the automakers were affected by chip shortage.

But how much was the impact? So an analyst company actually estimated this and they found that in 2021 alone, this number was $210 billion and we're still counting in 2022. So let's understand how it really happened. So this is my view of uh auto semiconductor ecosystem. So in the center, we have an auto plant which uh manufactures cars and it sells uh sends the cars to the car showroom. People come and buy cars in the car showroom and depending on the demand that the automaker sees, it will send the orders to the semiconductor fabrication unit which we call sub or foundries. But something happened in 2020 we all know COVID happened and COVID actually shook up the system. So it constrained the mobility of people and the people, the workers, they could not go to the auto plants and consumers like you and me, we were not able to go to the car showroom. So the car makers decided that the demand for cars is going to be slow in the near future. So let's cancel some order or let's reduce some orders to the fabrication unit. And so they did, however, something else was also going on.

People are buying more and more electronics because they needed to work from home or their Children. They wanted to take classes from home. So they wanted more and more electronic gadgets. And so this sector of the electronics industry, they increased their orders to the semiconductor FS.

Now, these semiconductor FS have been traditionally running on very high occupancy rates even before COVID. So when this happened, they were happy to allocate all the excess resources to this segment of the electronics industry. Now COVID still remain for some time and the mobility of people was a better after some. So the workers could go to the auto factories and people who were Sted at home now started going out for essentials and but they realized that they cannot take public transport, they need their own cars because the risk of infection is still high. So they went back to the car showrooms but there were very less cars because the automaker had reduced the production of cars. So the automakers went again to the fabs. They said, OK, these shivers are parts but the fabs were already full so they cannot give the automakers more parts to simply put here. The automakers have lost their place in the queue and the queue seems to be pretty long. Now, let's see what is the solution? The solution seems to be simple, right? The founders should just start producing more automotive semiconductors, but it's not so simple because otherwise ship shortage would have been history by now. But we still see news of chip shortage in a a automobile industry.

So to understand it, we need to understand a little bit about the technology. We need to understand what is inside the sic and arthritis, the semiconductor IC is an integrated circuit which means it has got miniature I circuit inside it. And one of the main components of that is the transistor chances to use in most digital usage is like a switch. So if you turn it on current flows, if you turn it off current stops, and therefore you get two logic stage. And this is approximately how a transistor would look like when it is manufactured. Now, over the years, as semiconductor technology evolved, this became smaller and smaller. And why did it become smaller because it can reduce power when it is smaller, it takes lesser power to do the same operation also it becomes smaller. So the area also reduces. So the cost to manufacture, this also reduces and therefore because of better cost and better power, the transistor continue to scale over time and this is how it looked. So in 19 9 and 87 if it was three micrometers now, in 2022 it is about five nanometers. And actually I had to add uh add a little shade in here because we couldn't even see it. It is 1000 times smaller than what it was 35 years ago. But who wants these smaller transistors, the computing industry?

So the HPC segment or the high performance computing segment like your data servers, your enterprise servers high performance computing like gaming segment. All of them, they want the transistor to be smaller and provide the power and cost benefit. So this is actually the technology part of the mystery.

So the computing devices, they want to stay in the far end of the spectrum where the transistor is smaller and smaller and they can provide the uh the uh cost of doing all this R and D. However, the automotive segment is very price sensitive a car of today, it takes about 100 to 1500 parts uh from the oil, from the semiconductor IC. So it is very price sensitive and it also requires more reliable parts, parts which do not age much and parts which can un uh withstand higher tolerance to em I to noise to vibration and can have a higher temperature range. So now we understand the technology part and uh of the mystery is that the automotive and computing require different technology. So how are these manufactured? Can uh 20 nanometer tab a 210 micrometer device? Not really, let's understand how it happens. So it all starts with the vapor.

The vapor is taken from another uh vapor fabrication unit. We add photoresist, we spin it and on top of this vapor, we actually uh use a stencil or a mask and we shine a light and the mask is printed on the semiconductor vapor. Now, after multiple steps of chemical and mechanical polishing and etching, deposition, et cetera, we will get one layer etched or deposited on this silicon. And after multiple iterations of this step, you'll actually get a semiconductor IC which will look like this. And then we cut these ices, we assemble it um and package it and send it to the O EMS where it is used. The main point is that the recipe for each technology node is different. The materials can be different. The way for handling capacity of the machines can be different. Even the light sources that are shown here can be different. And therefore one technology note path can cater to other technology nodes and you need independent paths for each technology note. So now let's look at the revenue part of the mystery. Now this is a revenue chart for one of the leading uh foundries called PS MC. Now we can see the major consumers of PS MC are the HPC and the smartphone segment which require the devices to go smaller and smaller. And if you look at the automotive industry, there is near 4%.

So it's now understood that automotive uh industries, they thought that uh uh semiconductor I CS are critical for them. But the semiconductor foundry does not find automotive to be a critical segment for them but have the foundries uh changed. Uh Yes, they have and they have started giving more and more automotive parts year on year. Uh percentage increase in revenue from automotive has seen 51% in the last year. However, now we understand that the foundries are full, they're already full because of the digital revolution, they're already full because of five G technologies. So now we understand the solution, the solution is simple, we need to build more and more boar. However, there are three main barriers.

One cost, the cost of building a foundry is anywhere between 10 to $20 billion. The time it takes to give a production part from a foundry is 3 to 5 years. And the next thing that has come up recently is equipment availability. Now that many subs are getting into construction mode, they want more and more equipment from the equipment providers and this is also in short supply, but we are moving towards the right direction. So first, the governments have realized that semiconductor ships are critical, not only for automakers but also for many other segments. And therefore they want to build stabs in their own regions as of today, about 85% of all the manufacturing that happens is in Asia and many governments have realized that this is a risky proposition in COVID like scenarios or in warlike scenarios, they need local production.

So us chips act, European ships act Indian semiconductor mission. These are some of the acts that are going to help the semiconductor industry make local production. The device manufacturers have also uh moved towards a better solution. They are also uh setting up new fabrication units and 22 pubs have started construction in 2021 and 2022 alone. Now comes the most important part, the automakers which were uh the um which were most affected by the chip shortage. Now, automakers have also realized that they need to have long term engagements with the chip manufacturers. Remember we saw in the earlier slides that they could easily cancel their orders at a very short notice. Now we need better and more meaningful engagement between automakers and semiconductor providers.

And we have seen this, many of the companies are actually hand holding the uh chip manufacturers. They are getting into design and they are even starting to produce chips in-house. Now, the big question, when will all it all this be over? The answer can be derived from the fact that the time it takes for the new parts to start production is between 3 to 5 years. So with the present capacity, we have started seeing some ease in the uh semiconductor shortage uh for the automobile industry, but it will not go away till about 2024. So the summary is that COVID acted as a catalyst to break the supply chain for semiconductor parts for automobiles.

But the digital revolution called for more chips production there and also opened up gaps in the supply chain for the automobile manufacturers because they were relying on signal sourcing and on just in time deliveries of semiconductor parts So they need to look into their own inventory system as well.

However, policies and device manufacturers are moving in a positive direction and we will start seeing in the semiconductor chip shortage. Overall, it is a time for great collaboration between automakers and chip manufacturers more so because we are all going towards an electric vehicle uh mode and they will need more and more semiconductor parts. So this is going to be a win win situation for automakers and chip manufacturers.

That brings an end to my presentation. If there are any questions, I'll take them now. So uh yes, Lisa. So chips are made up of silicon. So actually silicon is not a rare material. However, the processing of silicon to make the chips requires very, very high-quality. Silicon.

The silicon is taken from uh an uh a silicon ore, for example, a quads uh quartz rock, it is molten and it is uh then ingots are formed for silicon and they are actually sawed and we produce uh silicon vapors. But what it requires is that the silicon should be very high quality, which means that there should be very low defects in that. And it also needs to have one particular plane. Uh so it needs to be a single crystal silicon. So that is what makes it rare and it makes it, it makes it expensive. But uh the the base material is not really rare. However, there are some places where uh not only silicon, there are other um materials also being used. So uh yes, Tina. So automakers are low in priority in the queue because they actually cancel their orders. So that is one of the main thing that I want to say that the automakers need to have more meaningful and more long term contracts with the chip manufacturer. And so that they are not really low in priority. And uh the chip manufacturers actually they are always eyeing on the HPC and the smartphone segment which keeps them moving towards lower and lower technology nodes. So shortage of logistics. Yes. So the fabrication units also require some uh more equipment from other industries, for example, uh to shine the light as I've shown, right? So uh so that light itself uh there would be another company which will be providing the equipment for that.

So for example, there is a company called a SML and it is the only company which is actually making the solutions which can provide eu V uh lithography. So it is in um it it is in shortage. Yes, yes, NADI. So there are pain points all along the pipeline. So we have not discussed the other inputs to the fabrication unit. For example, there are, as I as I told um companies to provide equipment, there are companies which provide the vapors to the to the semiconductor plants and these vapors also for so for example, most of the automobile sector and they require 200 millimeter wafer, which means that the diameter of the wafer is uh is 200 millimeter.

And, and the other uh industry which is, which is uh the small and old industry, they require 300 millimeter vapor and uh the vapor which are 200 millimeters are also in short supply. So yes, there are pain points all along the pipeline. And yes, the pandemic is actually uncovered the flaws because it is it is a global supply chain and we need to rely on getting the parts from Asia. Uh Even though the car manufacturer might be in another region or even the o other electronics manufacturer might be in another region. But they all are sourcing in car parts from Asia at present, the risk analysts and forecasters. So it's um so everybody wants a lean organization, right?

So if automobile industries, they want to take all this risk into that, they need to build up inventory and there is a cost to building up an inventory. So they were relying on just in time deliveries of the semiconductor parts. And that is one of the reasons that they uh were so much affected by the chip shortage. So yes, it was um now we say it should be democratized. But actually when, when the semiconductor industry first started, there were many companies which had their own paths. However, because of cost purposes, most of the fabrication has gone to Asia and now that it is uh understood as an essential commodity. Now, it is going backwards and uh all the uh all the countries they want their own semiconductor plants. So uh Hina's question is would the automakers uh that are now creating chips, sell their chips to other automakers? So, one of the reasons that automakers are creating their own chips is first to yes uh to bridge the supply demand gap that is there at present. However, they want to add differentiating features in their uh in their uh electric uh vehicles mostly and if they are making elec uh differentiating features, they might not want to sell uh their chips to other automakers. Uh But that is something that we will see in future whether uh more collaboration happens in this front or not. So, Christine, yes, are we building a semiconductor chip fabrication plant in USA? Yes, there are many which have already started construction.

Um So they uh the bigger foundries like PS MC, they have announced that they're building fabs uh bigger uh semiconductor companies like Intel have announced that they are building fabs. So uh and there have been other acquisitions as well and uh there are fab uh chip fabrication plants being built up in USA, but there are already chip fabrication plants which are present in USA as well. So Marie uh the semiconductor companies are not so proprietary actually, the cost to start a semiconductor business is high. So the initial investment required is so high and therefore there are so less players than that. So, thank you so much. I think I um uh my time is up. Thank you so much for listening to this and please enjoy more sessions in the tech summit. Thank you.