Chip shortage and the need to structure industrial policies

The shortage of chips which today blocks the activity of very many assembly sites, even though manufacturers need to produce and sell more than ever, was foreseeable. If it is surprising today, it is fundamentally because the confidence placed in the virtues of a globalised market economy has been excessive. It is probably therefore time to correct market failures more actively and to give Strategic States and industrial policies a more active role.
While the automobile industry was still worried at the end of 2020 about its capacity to recover in 2021 a share of the demand volumes lost with the pandemic, the problem that is becoming clearer week by week is not on the demand side but on the side of the capacity of factories to produce the vehicles that the markets are ready to absorb.
In fact, since January, all the major world players have had to announce the shutdown for at least a few days of one or other of their assembly sites for one and the same cause: the shortage of chips which modern vehicles, like most of the goods produced in all industrial sectors, need in order to function and fulfil the specifications assigned to them.
Manufacturers are thus very proud to point out that the number of lines of code required to operate a new-generation vehicle is now greater than that found in an Airbus a few years ago and/or that the number of ECUs has grown exponentially over the last 20 years despite the regrouping of functions within the same ECUs that has been carried out to limit this inflation.
The German press thus revealed that, at the end of January, Economics Minister Peter Altmaier (CDU) wrote to the Taiwanese government to try to resolve this supply issue with one of the main chip manufacturers, the Taiwan Semiconductor Manufacturing Co Ltd (TSMC) group: finding a solution to this shortage is "of major politico-industrial importance" so as not to jeopardise the country's economic recovery after the pandemic would have written the minister asking his Asian partner for alms.
According to Le Parisien, the Taiwanese authorities have "taken the problem head-on" and the Minister of Economy has declared: "Our government and the producers of electronic chips are thinking about how to help the car manufacturers". She would have indicated that this would not be free of charge and that Taiwan was asking, in exchange, for Europe's help in obtaining vaccines against Covid.
We remember the Takata airbag episode in 2013-2014. We have also heard enough, since the sale of increasing volumes of essential electric vehicles, that the dependence of Europe and North America on Asia is technologically and materially problematic.
Today we are rediscovering that this lack of control of the value chains for European industry, and particularly for the automobile industry, is also evident in the case of on-board electronics: just as in Europe the plough of electrification was put before the oxen in the structuring of a battery sector that was technologically and geopolitically mastered, automobiles have been electronicised without ensuring the mastery of the components involved.
The current phase of development of the automobile offer marked by the multiplication of Adas, the development of connectivity and hybridizations and electrification makes automobile production even more greedy in chips. Since nothing has been done to resolve the question, even though the automobile industry is in this field in competition with almost all the other industries producing consumer or capital goods, it is almost surprising to be surprised by the deadlock in which the industry finds itself in 2021. This was announced and is probably destined to become even more problematic with the massification of the production of electric vehicles.
Indeed, we remember that exactly two years ago Xavier Mosquet and Patrick Pelata, commissioned by the President of the Republic, submitted their report entitled "Producing in France the cars of tomorrow".
Noting France's and Europe's dependence on batteries, they proposed to tackle this problem first and then drew up four key actions. The first three concerned the battery sector as such (design and manufacture of cells, control of strategic raw material supplies and recycling). The last, which was less readily mentioned in the comments, was more directly concerned with electronics and, in particular, power electronics: "EVs contain about ten times more semiconductors than conventional vehicles", the authors pointed out. They also pointed out that France - with STMicroelectronics, Infineon, Exagan or SOITEC - was not at a disadvantage and that the EU, aware of the problem, had made it possible to structure PIIECs (Major Project of Common European Interest) in this area.
Today, the acceleration of the electrification movement, the pandemic and the questions raised by the production of vaccines, recovery plans and the rise in rhetoric on relocation and/or "de-globalisation" could trigger a major review of the logic of the organisation of value chains.
Reports such as that of Mosquet and Pelata and, more generally, alerts that have been given in vain for years could be heard. The case of the current shortage of chips is indeed a very simple signal of the limits of faith in the capacity of globalized markets to effectively manage problems of industrial organization. In this case, the shortage comes into play for "standard" components even before the questions raised by Mosquet and Pelata have fully manifested themselves.
In a context where the manufacturers weakened by the pandemic will have a tendency to ask their purchasing departments to be even more short-sighted and short-sighted than usual to restore margins whereas more than ever they should be strategic and relocate, it seems that it is necessary to finally make room for industrial policies. 

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