Chip shortage: Toyota to cut global production by 40% | Hacker News Reader

Chip shortage: Toyota to cut global production by 40%

bbc.com

567 pointsmidnightcity694 comments

Toyota was one of the few (only?) companies to keep a large stockpile of chips on hand to continue production in case of a supply interruption. They kept something like two years worth on hand.

I guess 18 months of doing the extremely heavy lifting for the whole industry has taken its toll and now they're in the same boat.

I thought Toyota invented not doing that.

After the 2011 earthquake they came to the conclusion that for some hard to source parts you have to keep a big stockpile.

Basically if a part can only be produced by one or two parties there is too much risk of that source going away and disrupt everything else. This also applies all the way down the chain so if you got part A that can be made by 20 contractors but if all of those contractors depend on the same source then that part is also on the list of "stockpile this part enough to get over most disruptions"

Yes, they more or less invented the concept of just in time delivery, but they also suffered supply chain issues after the Fukushima earth quake. After the latter incident they made the risk calculation that inventory of some parts was worth the expense.

And then they invented that maybe they should keep poorly sourceable parts at hand. And chips are those. Unlike nuts, bolts, metal and plastics. Which you can easily find replacements for.

It is different to keep large inventory of everything because you are inefficient and can't function without it and different to decide to stockpile specific parts because of perceived potential risks while being efficient with everything else.

One big advantage of low inventories is you do not have to fix or trash lots of parts if they were made out of spec. In the case of chips the odds are they are all good. It is just the cost of ownership but not the cost of refitting.

They changed after 2011 earthquake when several factories couldn’t continue production because parts were not coming from factories impacted by earthquake.

JIT is probably the most mis-understood supply chain concept.

Wall St in general and Jack Welch in particular embraced the “avoid owning anything” at any cost model to juice the books.

I don't think that's exactly true and actually may be a common misconception - see https://www.youtube.com/watch?v=b1JlYZQG3lI for a much better explanation than I could provide.

Chips are small, don't age fast. Make sense as an exception to the rule.

That changed after 2011 earthquake

This is a misunderstanding of lean manufacturing. Lean is not about eliminating every stockpile, it's about thinking through your supply needs and only stockpiling what is necessary.

Power 101: Preach one thing, do the opposite

It is smart to project to the world that just in time manufacturing is effective and then stockpile parts. This will get you ahead of competition if there is a problem like we experience now.

Most auto companies don't take delivery of chips except for managing production of a few key modules like engine controllers. Most of the chips in your car are in components made by suppliers with circuit boards often made by a second tier supplier. Combine that with many chips having no alternate and I don't see how Toyota could really stay exempt from this problem. OTOH not every chip maker is having trouble keeping up.

Toyota doesn't have to physically hold the chips/modules to accomplish they. They have contracts with suppliers that lock in how much inventory the supplier has to have on hand, and how much supply they need locked in from their own upstream suppliers.

One criticism of Toyota's production system is that they aren't so much "just in time" as it sounds on the surface, rather they just force their suppliers to run the warehouse instead of them. Which still makes sense - Toyota wants to be in the car business, not the warehouse and logistics businesses.

I just wonder how deep this goes down the line of third party suppliers. Like, I know a lot of auto manufacturers use Bosch or Siemens for their ECUs, so I would think it’s really out of their hands. Then again, maybe they have terms in the contract to force Bosch to maintain a certain inventory?

I just bought a Toyota at MSRP last week. I was considering waiting a little longer, glad I did not.

Maybe this is a dumb question, but does anyone still produce cars without chips? It's possible, and in the current environment it seems like it would be a major competitive advantage-- and might be more reliable in general.

>and might be more reliable in general

Cars in, say, the 1960s were not "more reliable in general." It's not all semiconductor-related of course--they also rusted out quickly in areas that got snow--but 5 years/50K miles is about what you were looking at for vehicle lifetime. Also much lower fuel efficiency, to say nothing of lack of what we'd consider routine safety features today.

"Without chips" is not really possible if you want to sell in first-world markets, way to many requirements (engine efficiency, safety features, ...) you would be hard-pressed to meet otherwise.

I don't think it's possible. At least not road-legal in Europe.

There must be hundreds of chips in a modern car: Engine, ABS, wireless key, cruise control, radio, audio, electric windows, gps, battery management, airbags, seat-belt check, sensors, climate control, ...

I can’t think of any system in a car today that doesn’t use some chip somewhere.

Wouldn’t even power steering use it? Headlights?

Engines would have engine control units running some kind of real-time OS, anti lock brakes, anti traction systems, airbags, power locks with wireless keys. Climate control vs just “AC fan on”

Even some ignition systems have chips that do some kind of key exchange to start the car. (Yes you can bypass it but now you’re making a car that’s easier to steal)

probably not, regulation and crack down on pollution from vehicles. Have you ever rode in an older car that uses a carburetor instead of fuel injection? Nothing like the crisp smell of gasoline in the morning... or anytime you drive it.

No; it would be illegal in every major market, which if nothing else all require some sort of on-board diagnostics system. OBD has been required in California since 1988. India just recently required OBD on everything.

All new cars in the EU need to have an automatic emergency call system since 2018: https://en.wikipedia.org/wiki/ECall

That would be hard to pull off without chips. Although I guess you could keep it completely isolated from the rest of the car.

You cannot build a modern car engine without chips, let alone a car. Also, no way to hit safety requirements without chips (air bag deployment for example).

No. US cars got chips starting in the mid-80’s, so almost 40 years ago.

And they were actually much more reliable and efficient. Fuel injection was light years ahead of carburetors.

And I’d argue it would be impossible to meet emissions without computer control of the engine.

I don't even know if you can buy new off-road toys that don't have chips - four wheelers, side-by-sides, snowmobiles and the like. Pretty sure they all use electronic fuel injection these days, and that requires at least one chip.

When I started driving in the 80s, there was always a real chance that the car wouldn't start, or have a problem starting. Even new cars. Now? Except for a dead battery, I haven't had that problem in years, and we don't buy/lease new vehicles very often (our two current vehicles are 4 and 17 years old). ICs are far more reliable than old school electronics/mechanics!

Ugh... in one of the these threads on HN someone said a manufacturer was doing that, or at least openly speculating about it, offering a low tech model. I think it was in France but my memory is fuzzy.

It is probably possible but would require complex mechanical solutions to meet modern efficiency and emissions requirements that would likely be far less reliable.

It is possible, but the cars will be taxed into oblivion, because of push to electric cars. This is nothing new in finland because nobody there buys new car anyways, and continues to recycle existing old cars. Though that will also soon become impossible due to rising taxes to get rid of the old cars. I'm not sure which here is supposed to be more eco-friendly in the long run, but I suppose if you make people impossible to own anything that'll eventually win?

I thought Toyota was the pioneer of the “Just In Time” delivery where parts were delivered on time rather than stored in advance.

If you have a taste for irony, my company makes critical components for semiconductor equipment. If we can't ship, equipment companies can't ship new equipment. If they can't ship, semiconductor fabs can't increase capacity to meet the demand and solve the shortage.

We went line down last week due to shortage of a chip for our component.

In reality, the shortage is somewhat self-inflicted, like toilet paper a year ago, but for whatever combination of real demand + hoarding, we can't get chips.

A negative feedback loop in semiconductor supply seems like a situation where a government should just step in manage the market a bit.

Just the opposite. Need to let people raise prices to encourage slack in the system. Let’s prices settle where chip makers can produce new chips.

There are market failures where the government needs to step in, but this isn’t one. Even with climate change (where they should step in) the government can’t get to the point of saying it’s ok for gas prices to be high.

We don’t want the government to pick winners and losers when it doesn’t need to.

It's a puzzle to me why companies like nvidia didn't just raise prices and instead left both customers and profit to the dirty world of scalpers.

I guess it's "brand damage" but I feel there would be something more fair and honest if in times of tight supply they ran their own ebay-like store and auctioned them off. It wouldn't feel like a price hike and prices could automatically settle as supply/demand reaches parity.

1. Your comment doesn't even provide a prime facie argument against some forms of government intervention. E.g., we could let the market determine prices but mandate that fab equipment suppliers go to the front of the line.

2. Price is probably a red herring anyways. I'm willing to bet that fab equipment suppliers are losing out not on price negotiations, but on volume negotiations. I.e., they might even be willing to pay more -- even much more -- than other users, but can't buy in massive quantities so don't go to the front of the line.

3. Is there any (legal) mechanism at the moment that prevents chip makers from increasing prices?

4. Fab equipment producers are small consumers of chips but have such a disproportionately high impact on the rate of future supply. In the midst of a global shortage, we could straight up socialize 0.00...01% of chips produced every year and hand them out for free to fab equipment manufacturers without even effecting the short-term price dynamics. I'm not actually advocating this, but the assertion that earmarking a small number of chips for a particular high-value use fundamentally skew the market in the short-term is probably false.

5. Even if markets can eventually work in this case -- and for the record I'm convinced that this is a perfect example of contract negotiators being extremely myopic -- market dynamics have non-O(1) time complexity and the chip shortage is wrecking havoc on the real economy.

My comment wasn't suggesting price controls or socializing chip fabrication. It was suggesting that we very temporarily give special treatment to a very small consumer of chips that has an outsized impact on production rate, in the midst of a global chip shortage.

> Need to let people raise prices to encourage slack in the system

You're assuming that increased profit margins will automatically increase supply chain buffers. But rather, the same incentive to hire too many financialists that "save the company money" will exist, and the extra profit margin will just go to increased dividends.

And increasing the supply chain buffers won't help much right now either, it has to be done during good times. In fact I'd say most of the shortage is from companies deciding to increase their buffers, in the same way as what happened to toilet paper. "Hoarders" and "speculators" are easy illustrations to point to, but the real demand comes from regular consumers silently buying twice as much as they usually do.

"Just the opposite. Need to let people raise prices to encourage slack in the system."

"We don’t want the government to pick winners and losers when it doesn’t need to. "

Markets are not even remotely close to as efficient as you're implying.

In a clinch, people are making all sorts of crazy guesses at what the future will bring, making everything very inefficient. Remember that efficient markets depend on rational acting based on good information. We often don't have very good information at the unit level, and, we often act irrationally.

Some company flush with cash, decides to buy things at crazy high prices thereby denying the 'critical sources' (those that support production) access.

Right now there is a lot of parts hoarding - speculators buying up parts to sell them at higher prices. They're adding no net value to the system and causing all sorts of other problems.

The clearing of those prices may happen over time, but not without terrible damage being done.

Supply chains are not like stock markets with clear prices and instant transactions.

You may not need the government stepping in, but you definitely want non-market actions. For example, chip makers may want to work with their supply chains to ensure a kind of absolutism or preferential customer tranches.

FYI this already happens, all the time. Price is not King for parts, like it is on the stock market. Vendors of 'everything' are aware of the long term growth of their business, and will generally want to work with consistent buyers.

So in this FUBAR panic, supply chains have to think not about one thing, about many.

I believe that root causes was already a fait-accompli at the start of the pandemic when a bunch of parts of the supply chain shut down - we're still paying the price of trying to get things going.

What makes you think the most critical uses have the most money to pay for chips? I'd imagine there's a lot of crappy (or in any case not critical) consumer products that have much higher margins.

Exactly, its so weird that price sensitive recluses never just considered that GPUs were undervalued?

“Omg these [new market entrants] are messing up my ability to take screenshots of my framerate and never enjoy myself”

Well now its back to business use cases!

> Need to let people raise prices to encourage slack in the system.

The scalpers can absorb the rising prices until the desperate companies no longer can afford the increase. That will cause the market crash, which is not good for anyone. I think government should regulate that space so that businesses engaged in scalping could no longer purchase nor sell the chips.

It is a positive feedback loop, not a negative feedback loop. See https://en.wikipedia.org/wiki/Positive_feedback.

It’s negative WRT the chip production rate.

What experiences with which government would lead you to believe that bureaucrats -- most of whom have never run a company nor made a product -- would be capable of "managing the market"?

I'm not sure experience running a company is necessarily a good thing here, or at the very least, not pertinent. Wall St.'s and the American people's interests are not necessarily in line. The US' previous president ran some companies and did not really do a good job in this regard, either, wrt his trade wars.

The solution to a market inefficiency isn't to involve a more inefficient entity.

This is a pretty axiomatic view that governments can never be as responsive or as efficient as markets. The more commonly accepted economic wisdom is that they are usually less efficient and responsive than free market forces operating under ideal conditions. There is a lot of room for market failures, inefficiencies and temporal dynamics to change the balance. The are plenty of examples of government regulatory bodies that have a nice anchoring effect on the relevant markets. The Federal Reserve Bank, for example, responds quickly to changing market conditions, looks at the data and intervenes at a speed that keeps pace with the rapidly fluctuating market it regulates.

We're in this mess due to our never ending quest for more "efficiency"

The government needs to recognize the fact that semiconductors are essential to national security and ensure we have the capability to produce our own.

Then what's the solution? Seems like the government is the only entity that can intervene if market forces are counter to supply chain resilience. This is partially the justification for agricultural subsidies in the US, so clearly there is precedent.

That sounds nice, but a singular entity within a government, entrusted with the necessary power to regulate the relevant parts of the market without too much coordination overhead with other government entities, is actually much more efficient at resolving market inefficiencies than the free market. Case in point: production of vaccines.

That's also obvious: the inefficiency in governments originates largely from coordination overhead between many competing entities with overlapping responsibilities. Self-regulating systems like markets do not eliminate that overhead, they just use other means of coordination that trade some of the complexity overhead for a time overhead - instead of having to coordinate a complex set of rules, you now have to give the system enough time to "find" its stable state. But when time is of the essence, an intelligent, singular entity without the need for coordination with anyone besides the entities to be regulated can always outcompete the self-regulating system when it comes to short-term stabilization (though not necessarily with regard to long-term stabilization, but that's not the issue here).

This assumes an efficient global market, without interference from other state actors.

If other countries are implementing protectionist policies, like keeping semiconductors for themselves or supplying other nations first to curry favors or improved relationships, for example, it might be in another nations interest to increase fab capacity with its borders to avoid being vulnerable to those political and diplomatic factors.

Ah yes, the Herbert Hoover approach.

absolutely no. government interventions rarely (if ever) are helpful in managing supply and demand.

Why? Is the government better at inventory and/or supply chain management than the current players in the market? My experience with COVID tests says no.

No, but the government can shoulder a larger risk than what the private sector may tolerate.

There's all kinds of examples, but aerospace is a classic one. There would be no airline industry or commercial space industry if the government wasn't willing to bear a disproportionate amount of the risk when these industries were nascent. There just wasn't enough market demand to incentivize the private sector to do so on their own. So the govt sets up an incentive structure that brings the risk to a level where the private sector is willing to partake. The government is also generally more tolerant of longer-term scenarios than the private sector.

No one is saying the government should start producing chips, but they can offer financial incentives to encourage chip manufacturers to build fabs here instead of overseas.

I think that your experience with COVID tests would depend strongly on which country are you in, and which government you are talking about.

> A negative feedback loop in semiconductor supply seems like a situation where a government should just step in manage the market a bit.

Unfortunately, no Western government can do it even if its life depends on it.

German trade officials for example went and completely prostrated themselves in front of Taiwanese govt, and TSMC, offering anything short of switching the recognition of China to Taiwan.

It bounced off without any effect.

It was only a blank cheque from USA that made them to even scratch, and that is still pending that cheque being honoured, and cashed out.

The article (and others about this topic) indicate that the chip shortage isn't just a static. They all claim that chip and other supply chains (all based on South East Asian) are all under new pressure from delta strain spread.

In fact, I wonder how much of this really is chip supply vs general supply. Most articles on this open with headlines about chip supply, but then contains quotes from Toyota about "supply" and "parts" in general.

I can't speak for Toyota, but for my own electronics manufacturing business its definitely a chip specific shortage. We don't really have huge problems getting most stuff, but digital ICs are more and more just simply unobtainium, with vague lead times of 1-2 years.

Highly anecdotal, but I spoke to Bilstein about some seemingly unobtainium shocks yesterday. Pre-pandemic these part numbers were common as dirt.

They said their sales were up 50-60% over the last 18 mos, and that raw materials supply is down by a similar margin.

These are shock absorbers, not chips or toilet paper.

It seems like we're seeing the delayed effect on supply chains over the pandemic. There is surely no value in hoarding shock absorbers, and if distributors were the hoarders, they seem to just be sitting on them, not raising prices.

Much of the ECUs OEM are purchasing from Tier 1 suppliers (Denso for example - a Toyota spinoff) who are directly hit by IC shortage, so that's why they are talking about overall supply. Also Japanese OEMs and suppliers tend to favor ICs from Renesas, and Renesas has been hit particularly hard this year [1].

[1] https://www.renesas.com/us/en/about/press-room/notice-regard...

Yeah, this also makes no sense to me:

> The Covid pandemic boosted demand for appliances that use chips, such as phones, TVs and games consoles.

SOCs in phones and game consoles are produced on very different processes than chips used in cars, no? Cars don't need the smallest dies or most energy-efficient chips. These industries are not competing for the same capacity. Or am I missing something?

They certainly overlap. SoCs aren't the only chips in game consoles or other devices, different kinds of chip production have shared supply chains that themselves are struggling, SoCs used in cars aren't necessarily that different from the ones in other appliances (e.g. NVidia Tegra X1 is used both in the Nintendo Switch and some cars, and probably a pile of other things) ...

Not everything is a purpose built CPU, GPU or SoC on cutting edge nodes. There are many general purpose ICs that are boring and ubiquitous: Display drivers, power conversion, amplifiers, microcontrollers, etc.

Agreed. If you move far enough up the supply chain, you'll find the same components being used in many different types of devices.

modern car entertainment systems often use some of the same parts as tvs/game systems/pcs etc

perhaps the engine ECU is not the chip that is in low supply

Hypothesis: there's a correlation between shortage of chips made with cutting-edge processes and chips that are not, because a lot of them are made by the same companies (and the supply-chain issues are impacting companies not just product lines). For instance, in addition to having the bleeding-edge 5nm node, TSMC has a lot of larger nodes and specialty non-digital-CPU nodes, too[1].

[1] https://techtaiwan.com/20210816/tsmc-speciality-technology/

> SOCs in phones and game consoles are produced on very different processes than chips used in cars, no?

Yes, some of them are different. Consumer chips are not industrial norm, they have narrower environmental operating ranges.

The foundries producing automotive chips shifted production to consumer chips during the lockdowns, as the auto production lines were on hold. This caused supply chain disruptions. Add to that US > China IP export bans and you have a black swan event.

So new cars are going to be come more expensive due to supply limitations and in turn used cars will continue to become more expensive as they can rise to a certain % of the new car price. At the same time housing prices continue to sky rocket. Seems like not a great time for someone just stepping into adulthood and financial responsibility.

> just stepping into adulthood and financial responsibility.

I am older than that (40 and my wife is 35) and while we have been independent professionals for a while, we now have a 1 year old so this summer for the first time in our lives we bought a house and a car.

It was definitely harder to find a house (mainly less availability driving competitive bidding) and it took a little longer to find a car and we ended up having to pay MSRP.

However the thing I can say is - the incremental cost/hassle of having to do these things during the pandemic supply crunch is almost irrelevant compared to having to do this stuff at all. We paid say 3% more for the car and ok maybe 10/20% for the house than we would have otherwise, obviously that's painful but if I was "just stepping into adulthood and financial responsibility" I'd look to avoid this stuff altogether.

EG: do you need to own a house? If you're a single person, "throwing away" money on a relatively inexpensive rental might be much wiser than "investing" in a house in a seller's market. Likewise, if you're young and single then you should relatively easily (depending on where you live of course) arrange your life to not need a car. It was very easy for us in NYC, of course may be different for you.

The point is that in my mind, "adulthood and financial responsibility" don't have to translate "got my own house and car" but simply "making wise financial decisions given my situation" so if there's room to be flexible, be flexible.

When I was in my early 20s, someone gave me this exact advice. I didn't have much money and they said that real estate was too expensive and I should just invest/rent. Fast forward to today, I paid 8x more for my small sad house than I would have then and my investments on my small amount of money didn't make up the difference.

The market is so screwed up that even a crash that halved the price would still be 4 times price back then.

Finance guy here, two things. You are looking at it in retrospect. "I should have bought a house" is no different than "I should have bought X stock" when you're looking at the price history backwards. At the time, it could have gone up or down. EG we just bought a house, I have many reasons to expect that it could drop in value over the next bunch of years.

Second, you may not be doing proper calculations. I would not have - before I bought a house. Do you count property taxes, upkeep, larger water and electricity bills, possibly longer commute times/needing a car, relative lack of mobility, air conditioner/heating/roofing/siding/repair, lawn maintenance, etc.

Yes sure, if I bought this house 10 years ago, it would have been great. But I wouldn't know 10 years ago that I'd want this house, and for example dealing with all the above shit as a single man would have been stupid. There were also points in my life where I was very open to relocation for the right job, something home ownership would have put friction on.

it's very common to think of only a pro or a con of a decision (if I bought earlier, it would have only cost X) but you're not factoring the risk that existed at the time, nor the commitment you're creating on yourself, not the carrying costs I described above.

May not be relevant to you but I feel fine about "losing out" on 20 years of house appreciation (if I bought at 20 not 40) because I avoided all that stuff for 20 years, too.

NYC (esp. Manhattan and parts of Brooklyn) is pretty exceptional in the US with respect to there being no expectation of car ownership. You can get by in other cities out of school (especially given app-enabled rides, Zipcar, etc.) but the general expectation is car ownership.

As for housing, it's perfectly normal to rent for a while until you know you want to settle down in a location for an extended period of time.

Rents are going through the roof, too.

And when you try getting that hole in the roof fixed, you might run into even more problems:

"Roofing Industry Faces Unprecedented Supply Disruption" (April 27, 2021)

https://www.roofingcontractor.com/articles/95590-roofing-ind...

The fact that you can weather the extra costs doesn't mean it's "no big deal," which is how your posts comes across to me.

The point of my post was to give the OP some pragmatic advice, on the bigger-deal lever he has in his life. Obviously there's a marginal drop-off of who can afford X if X goes up even a little.

CPI is showing a 45% increase in used car prices over the last year.

The difference being that lots of people want to keep those inflated housing prices high (nimbyism), whereas nearly everyone wants car prices to go back to normal.

Nimbyism exists, as do more concrete constraints in urban locations but...

The way house prices work, often, is more or less banks determining prices via mortgage eligibility. Banks agree that a house is worth X. They lend X. That becomes the price. Buyers tend to be available.

People are so quick to see that credit expansion fuels price inflation in other areas, even the economy at large, but somehow diminish or ignore this with housing.

Obviously, supply constraints avoidable or otherwise, affect supply. In any given year though, the supply of housing does not change a ton. Where they do, you don't tend to have wild inflation... though you do often see bigger houses.

It's impossible to decouple housing from monetary policy. Housing is one of the few ways that buying power gets from A to B, where B is not a financial institution or direct spending.

>> whereas nearly everyone wants car prices to go back to normal.

There is a significant voice that would like to price cars out of private ownership. Traffic, pollution, safety, urban sprawl ... pick your evil and someone wants to eliminate private cars for that reason.

I regularly read about how the next wave of cars will all be somehow "shared", that we will whistle and they will appear at our doorsteps ready to carry us off to our 9-to-5 jobs in shiny glass office towers. I just don't see that happening anytime soon. Total conversion to electric cars in 10 years, maybe. Conversion to total ride-sharing and/or mass transit, doubtful in 30.

That's like 0.1% of people

Car prices won't go back to normal again though. They will come up clever financing schemes to make people pay but the prices will never be reduced.

There's huge inflation in many things related to making cars (chips, steel, shipping costs as many cars are still being shipped across the ocean, labor costs, etc.). We are likely to be in the very beginning of significant inflation cycle, with probably double digit inflation which will eventually drop to 4-4.5%. I wouldn't expect to prices to drop any time soon, nor have 2% inflation. My bet is that fewer and fewer new cars will be sold in the next few years (3-5) with prices rising 4-10% each year.

This is mostly just a reflection of the fact that the value of the dollar has declined precipitously over the last 18 months. Dollar prices are sticky, so it can take a bit of a shock for inflation to “kick in”, but we’ve had plenty of shocks to go around.

When do we get 30 year loans to buy a car?

I don't think it's necessarily NIMBY or at least my understanding of it that makes people want to keep housing prices elevated. If I buy a house at an inflated price, I want the house value to continue to rise as a large degree of my financial security is tied up in that house. My ability to refinance, take cash out and eventually even sell that house are tied to it continuing to escalate in value. In the US this is particularly true as so much of out net worth is essentially our home value. As inflation increases and peoples ability to save is even further reduced this will become even more of an issue.

NIMBY-ism doesn't make people want housing prices to rise.

The wish to inflate housing prices causes NIMBY-ism!

I would say it is more self perpetuating. With housing prices growing as they are, people are saving less for retirement and putting that money into their house with a plan to cash out, move to the country, and retirement.

I live in a country with a working public transport system.

I'd prefer it if ICE cars were as expensive as possible in order for the planet not to burst into flames.

Not really a great time for anyone really, at least from the vantage point you're referring to.

If you're an established adult who owns a house and two cars, your assets have skyrocketted. You're having a great time.

how? can you capitalize on that upside somehow? sell them, live in a tent until prices are down?

The chasm between the lower class and even the middle class is widening by literally the week.

It's been "not a good time" since 1975. Prior to that, at least in first world countries, you could start with less intelligence and have a much better chance at class improvement and even financially secure retirement than now.

On the other hand, if you're in politics, finance, or executive business management, it's been a really, really great last 40+ years.

Incomes are way up for the top ~30% of earners, not just the ultra-wealthy.

> stepping into adulthood and financial responsibility

The timing of my life events is one of the things I am most grateful of.

I graduated in 2014 and within a couple years I bought a house. Strong job market for an employee and low interest rate.

I know people that were getting PhDs, because they started undergrad in the aftermath of the housing bubble and couldn't find jobs when finished. I also know people that decided to buy a house before the bubble and are still stuck underwater, preventing them to pursue opportunities not in their area. I also know people that went into medicine as tuition became ridiculous and have no way of servicing their student loans.

I guess what I'm getting at is count your blessings. Others may not be as fortunate as you.

but stop and think for a second about all those short term profits Wall Street made by outsourcing all of our crucial manufacturing! Those congressional bribes don't pay themselves either! /s

the worst part is our government is rewarding them for bad behavior, the article mentions the billion dollar chip subsidy program. So these companies made money outsourcing and will now make more by bringing it back. Instead they should put a massive tariff on any chip not made in the US. Companies that invested here would be rewarded for loyalty

What short term profits? The car industry has among the lowest margins in the entire economy.

Moreover the chips were never outsourced. Toyota never made its own chips, nor is it feasible to. You seem to have some sort of idealized view where a company internally manufactures everything it needs starting from raw materials. That’s not how it works, and that’s never how it worked.

"silicon valley" is the name because of all the chips that used to be made here, US used to lead the world in chip manufacturing

Toyota is just a symptom, every other car manufacturer and other industries are facing shortages as well. The US economy is now strangled because our supply chain got outsourced for "efficiency" that didn't account for potential disruptions

It's a bit too easy to blame this only on Wall Street. First of all companies have outsourced their production facilities to lower production costs. The parties benefiting from this were:

- shareholders (more profit)

- consumers (lower prices)

Second, you could say shareholders == Wall Street, but you could just as well say that shareholders are pension holders, banks, insurances and small private investors. All of these simply want to have return on their investment that is as high as possible. If that's good or bad is an interesting question, but the bottom line is that very few people are without blame here.

Spend 5K on a really nice commuter electric bicycle. You'll be doing a solid for the Environment and you'll have an EV that makes you fitter.

I live 50km from work now (thankfully looks like mostly remote forever, the COVID silver lining), but I used to bike to work before I had kids.

I don't know that I'd do it again. The number of avoided-death-by-split-second close calls that I racked up in about five years is just too high... Now that I'm a bit older and have children, seems irresponsible.

This is in a city with relatively developed bike infrastructure, including separated lanes in some places. (Some) drivers just don't give a damn, and while I wish it was different, I don't see it changing any time soon either.

My problem with 5K on an electric bike is the 50 mile commute one way to work in inclement weather.

If you have a kid that's not a workable solution, moreover, safety is a huge issue on 2 wheelers.

My problem with dropping 5K on a bike is that they get stolen

High end bike parts are also in short supply. Popular electric bikes also have months long waiting lists.

This is great in theory but not so great when you are food shopping for a family or you need take the kids to get new shoes.

This so-called “transitory inflation” is really starting to seem like it will parlay into full blown inflation.

https://www.nytimes.com/interactive/2021/08/18/opinion/infla...

"In July, some of these sectors (used cars in particular) experienced a big deceleration in inflation, bolstering the argument"

https://news.yahoo.com/us-used-car-bubble-burst-141009925.ht...

"The price index for used vehicles rose 0.2% in July, after having risen at least 7.3% in each of the previous three months. The category was one of the few, along with hotel rooms and airfares, that drove recent inflation, the economist Paul Krugman pointed out on Twitter. “Combined, these three sectors account for…more than 1/2 [half] of inflation over the past three months,” Krugman wrote. In May, in fact, a full third of the overall price rise was due to the surge in used car prices."

Regardless of prior academic work, Krugman's Twitter and NYT opinions are blatantly partisan rather than scientific. Whatever he says, do the opposite. https://contrakrugman.com/ (edit: slightly more specific and less ad-hominem)

Used cars have a natural price cap, and my understanding is that it has been reached. They are too close to the price of a new car to go any higher.

Maybe, but with new cars being sold for above MSRP, that natural price cap is rising.

The price of a new car is whatever the dealer is willing to let it go for. MSRP is a starting point, not the final price, which can be literally anything.

Not everywhere though. I recall Venezuela had unusual car prices about a decade ago.

Car dealership inventory was very low due to currency controls and wait times at car dealerships increased to months.

A slightly used car, inmediately available for sale, was more expensive one than a new one with months wait.

Yeah, I normally buy used, and this time I just bought new (technically I leased new, but it's the first time I'm leasing a car in my entire life), because it just didn't make any sense to me to buy a used car for almost the same price as a new car.

If you can get a new car. In theory, a used, available car could be worth more than an unobtainium.

While possible, look at lumber prices now[1] in the context of articles from April saying that the high prices would persist.

Economists who study these phenomena tend to be a better guide than reporting that is in the middle of reacting to dramatic signals like shortages and fast price changes.

[1] https://tradingeconomics.com/commodity/lumber

> This so-called “transitory inflation” is really starting to seem like it will parlay into full blown inflation.

A lot of the people screaming about inflation were doing so using the argument that there's too much spending and the "excess" money supply will cause the US to turn into Zimbabwe (Fed printers go brrrrrr): demand-pull inflation.

The price fluctuations caused pandemic-related supply issues (cost-push inflation) don't have much to do with money supply and stimulus packages.

* https://en.wikipedia.org/wiki/Inflation#Keynesian_view

If things get too hot, it's easy enough for interest rates to be pulled up, but given un/employment isn't at pre-pandemic levels, policy makers may let things ride for a while.

My argument doesn’t hinge on the excess spending. Rather, the increase of costs due to a labor shortage, chip shortage, construction materials shortage, etc. is having a compounding effect across the whole economy.

The Fed doesn't seem to care about inflation adding even more burden to the poor. But hey, at least all the asset rich political donors are happy

How is this related to the chip shortage and Toyota?

When the supply of goods goes down, it pushes prices up.

But inflation has to do with the supply of money, not the supply of goods, right? Genuine question

Only if you let greediness exist.

I bought 2x4s for $3.60 last weekend.

Just a month ago, HN was rife with lumber apocalypse.

A shortage is not inflation

Supply and demand change is what increases or decreases costs. If demand don't adapt, there will be inflation to force it to adapt :)

'Inflation' is not the price increase of a single thing to demand/supply.

Inflation is the systemic increase in all costs of what a household would buy as money itself become less valuable.

Prices 'inflating' on a single product because there's a shortage of... base materials or whatever is not inflation as an economic term.

Many countries have a funny concept of strategic industries.

In mine, dairy is a strategic industry that is coddled by government so that we can have a local source. But every country thinks that so there’s foes and allies that can supply us UHT or powder milk on a moment’s notice. And if our milk supply disappeared tomorrow, everyone over 1y could substitute with 10000000 different things for nutrition.

Cars are another. Every country props up its auto industry, so why worry about a domestic supply?

Meanwhile, there are critical components, pharma ingredients or other inputs built in 1 factory in a country we could likely end up in a big dispute with.

Just goes to show that industry protection has nothing to do with risk/dependence on that product, and everything to do with picking and choosing which industries are important voting bases.

How much would it cost to set up TSMC inside US borders? One president cycle? 4 F-35s? One SLS? A nuclear submarine?

According to this page, sorting by cost, https://en.wikipedia.org/wiki/List_of_semiconductor_fabricat...

the most expensive fab is 33 Giga$. TSMC is 17G$. pennies on the dollar in our 1-3Trillion infrastructure bill.

Make america fab again.

EDIT: it appears this is in the 2T infrastructure bill. https://www.eetimes.com/biden-ups-ante-to-50-billion-for-chi...

Building it is one thing. Making it operational without importing talent and running it profitably is another. Taiwan has some of the best fab engineers who work at US minimum wage salaries. Of course you can pull them away with higher pay like China is doing, but that means profitability will likely go for a toss.

Government can't make a website, let alone a chip fab. Talk to Intel and ask them why we've fallen behind. Do any VCs want to fund a direct Intel competitor? I doubt it.

Making chips seems to be quite a bit more complicated than making and launching rockets, I don't think even Elon Musk could do it.

> Make america fab again.

America does fab. However not newest nodes at high capacity. It just doesn't take building an identical factory and hiring away engineers. There is a complete supply chain of specialist companies which produce or fix the part the part that goes into a machine that that ... . Not mentioning that those construction costs are at economies of scale of building factories.

Such a thing can't be build in the US as every state needs a piece of the pie. An US run copy will be more expensive even when you ignore wages. Extra spare capacity for emergencies is not sound either.

We're doing it but obviously Taiwan isn't going to give up their smallest die processes (only older processes) since it keeps the US at least unofficially allied with them.

I assume that is if you already have the know-how. Starting from (almost) scratch would require more upfront work, right?

Reuters previously reported that TSMC plans to build as many as six factories at the Arizona site over a 10- to 15-year span. https://www.reuters.com/technology/tsmc-says-construction-ha...

Heck, didn't Apple finance expansion of TSMC so Apple could ensure that they received priority when ordering chips?

Part of the reason fabs are spread out is capitalism: if you manufacture the part in the country, you don't pay import taxes (e.g., Intel's Ireland fab debacle).

Another part is lax environmental laws. Hillsboro Oregon is embroiled in a suit with Intel where Intel dumped 100x the fluorine into the air that they claimed when D1X was first pitched. Don't need to worry about that stuff in Asia (for now).

Also, lead time. The x-ray litho machines take years to build and test. There are only two companies that make Intel's testers, and the lead time is years. So a "quick fix" isn't possible.

Speaking opinion: in the long term, it is mostly rich people trying to get richer that caused this. If greedy CEOs and shareholders would just be humans for once and think about the future we wouldn't have this trainwreck. That ain't ever gonna happen.

Isn't TSMC working on expanding into the US?

What are Intel doing then?

in a few years there will be 10x number of factories. Covid just sped things up. It's too critical for army and other industries. Food and army cannot be outsourced.

Cost isn't the issue, it's that we have incompetent buffoons as presidents these days.

https://www.youtube.com/watch?v=TuW4oGKzVKc

That's what a president sounds like.

Highly visible industries tend to get a disproportionate number of subsidies, because the population can relate to them, and politicians aren't that clever either. Film and television are good examples, and fishing tends to get a lot of attention too.

Pretty much everyone understands that computer chips are needed for everything these days though.

The population can relate just fine. It's just there's no one rich and powerful who wants to make the investment that is making it an issue.

> Every country props up its auto industry, so why worry about a domestic supply?

War. In the event a war breaks out, a running auto plant can be re-tooled relatively rapidly into a light and heavy armor plant. It's not even a question of whether allies could supply tanks and troop transports; it's about having domestic capacity to make them because enemies could execute blockades and disrupt allied resource supply.

That's the same reason why food security is so high up on domestic priorities also. If a country is dependant on other nations for food, then in case of war you just need to target their logistics chain to starve them into submission. All those subsidies make sense, if you view the nation-state as primarily concerned with its own survival.

Except for getting subcomponents and today ics are the crucial thing. What do you bomb first, the ic manufacturing of the other side? Or take it away by force (like Taiwan's).

I am skeptical that a modern automobile factory could be converted to make tanks or airplanes at any kind of scale using current designs.

The stuff is so specialized and automated now that even the workers probably wouldn't have much translatable knowledge as WW2 days. You would i guess have a supply of welders to lean on at least that would ramp up faster than someone fresh.

But I doubt a factory that makes modern cars can handle making M1 Abrams without so much additional tooling and extra equipment that you are halfway to making a new factory anyways. (they could probably handle making light vehicles like cars and bikes at least)

Maybe if we had mass production style designs that were built purpose first to get cranked out. But we don't, and there isn't profit in that for the Military Industrial Complex.

Is that still true now?

this. If you look at all the strategic industry subsidies, you will see this common denominator. Corn in the US is stupidly subsidized, so much corn that it ends up in car tanks. But guess who will not have a famine even if the worst war + disasters strike?

Car factories might not make good tanks, but the mechanical engineers and tooling knowledge is invaluable and can't be scaled up overnight.

Same with solar panels, there's a reason both Obama and Trump imposed protective tariffs. One of the few areas both parties agree to. PV panels are the future of energy, so you need to have domestic factories no matter the cost.

> picking and choosing which industries are important voting bases.

And on a bribes and corruption basis, to some extent, too?

For example, I never thought about what are the strategic industries, when voting.

> For example, I never thought about what are the strategic industries, when voting.

You're clearly not a dairy producer in Wisconsin, a military contractor in Virginia/Maryland, or a property owner in Southern Pines, NC.

Indeed. The goal is to not have the government pick industries. Politicizing who gets aid to any greater degree would only serve to further subdue innovation.

Most voters aren't as rational as you are. Though, I suspect that you would not vote against your livelihood if it became a political topic.

West Virginia has "Friends of Coal" license plates. Indiana has IUOE license plates. etc.

Are you in Canada by chance? I have fond childhood memories of smuggling cheese across the border from the US because the dairy protectionism has resulted in prices that are 3x higher. We used to do that with electronics too, but Canada has no electronics industry so it's weird why it was so much more expensive. The gap has decreased in recent years.

It's definitely worth keeping a skeptical eye on non-market interventions, but there are a ton of good reasons for it.

For auto - companies do not exist in isolation. They're a huge pillar for other things, especially the local economy.

If you were the CEO of a 'region' that actually owned all of the businesses, this would show up in your balance sheet: it would be perfectly acceptable to lose money in your auto-making 'division' if it meant that the 'education division', 'healthcare division', 'civic division' were made profitable.

Japan also makes a ton of money exporting it's cars so it's valuable.

Finance, telecoms, farming and entertainment all have different reasons for being supported but the impetus in most cases is rational.

If anything we probably need more high end fabs and this whole 'single source with 24/7 operations' is maybe not worth it, we might just have to be paying a little more for our chips.

Yea this is very interesting. I suspect another side to this though is I don't know that one country can easily or safely not participate in this chosen industry support.

Especially in capital intensive industries, say cars, all of the competing countries are propping up or bailing out their auto industries. So even if companies should theoretically die and get replaced, there is a structural disadvantage as the competition in other countries has an insurance policy against companies failing (bailout / subsidy / tariffs / strategic protection / etc).

Indeed, there seems to be a difference worth noting between "industries that currently employ a large number of the population with little transfer of utility to other industry" and "objectively basic needs for a society".

I figure there are also different definitions of strategic depending on the size and capability of an economy. The US is large and geographically fortunate enough that it theoretically "could" be almost entirely self-sustaining if it set its mind to it. Fuel, semiconductors, transport, lumber, food, guns.

> Indeed, there seems to be a difference worth noting between "industries that currently employ a large number of the population with little transfer of utility to other industry" and "objectively basic needs for a society".

Did you consider that it's because people need an income to survive? Employment is objectively a basic need for anyone who doesn't own sufficient capital being that they have nothing else to sell but their labor.

On that matter, I think (just a not-so-well-informed opinion but still plausible) most countries should urgently protect their software development industry and dramatically reduce taxes on those companies. Because the day US/China automated-production AIs will get to its prime, nothing produced in your county will have any value whatsoever beside land. Ferrari and Rayban? Near-zero market value tomorrow.

"Because the day US/China automated-production AIs will get to its prime"

I think this time is quite a bit far off. But eventually will have sourcing price of just the raw materials. That said and regarding your next point -

"Ferrari and Rayban? Near-zero market value tomorrow."

On this I disagree strongly. Current trend is that IP becomes constantly more important. So that while manufacturing costs for said items may tumble, IP laws likely protect the sale of items branded as such. And the price difference does not likely result in cheaper prices, but in a bigger revenues.

How the essential farma became nearly 100% reliant on foreign manufacturers is I think the most exemplary case of this nonsense.

I read some year ago that there were laws in US which at least somehow discouraged the pharma from shipping manufacturing abroad, and it was the big pharma itself which lobbied these laws out.

This is how China held US at gunpoint in the early days of COVID — "Stay put, or we pull 90%+ of your antibiotics supply"

I don't think china did that, any supporting news articles?

Come on, we all know this problem and we all know the solution. It's probably red-circuits that we are talking about here. We've all been there: you have your yellow belts full of green-circuits, but the red ones are just so much more complex. You need to set up the entire oil production chain for that, which is tedious and you probably rushed it just 'get a few red circuits so I can get my electric furnace'...

I say, take a step back, take some time and really automate plastic-bar production (yes, even the oil wells and refineries, and don't just put rocks in a container, belt them over there like a grown-up)

Only after producting enough for a full red belt, should you continue expanding into other branches, like robots and faster belts.

Don't they teach this stuff anymore?

I'd laugh but then I saw this comment: https://news.ycombinator.com/item?id=28233436.

Yup, Factorio is a nice way to learn about supply chains.

Unfortunately, like almost all videogames, it assumes the whole system is run by a benevolent dictator (i.e. the player). In real life, most of the complexity and most of the waste comes from the system being built incrementally and operated by great many parties in a mix of cooperative and competitive relationships.

Real life work in the tech industry at a large employer is like a playing some sort of multi-player game of Factorio where you can't actually see what's going on outside of your little corner of the factory. Once in awhile the logistics bots will all just vanish for twenty minutes, or the power will go out, or the belt with copper plates will suddenly be carrying iron plates. There are all kinds of blueprints to make your life easier, but most of them are deprecated or obsolete, and the one your really want is buried in some email chain.

Ah yes, the blackstart situation. So terrible once you switch to nuclear.

I think you're still allowed to laugh

Think of biters as a metaphor for competitors, taxes, and regulatory compliance.

I love playing Factorio, but it's moments like above when it starts to stop feeling like a game and it starts to feel like refactoring code at work.

Factorio is a nice and simplistic (and fun, for a while) way to demonstrated many aspects of software and product development.

You go through basic product planning and design, first quick MVP, then some feedback loops where you recognize some needed design changes, etc. Then once you have it figured out, you want more.

So you start scaling up. That scaling often necessitates refactoring, because it necessitates space and time management (no sense having a bottleneck in your system which limits your growth potential).

Then you have the aliens which represent unexpected problems and failures.

A while back someone posted about playing Factorio with job candidates as a way to see how they thing and solve problems. This is probably much better than most tech interviews. If you can be decent at Factorio, you can probably be pretty decent as a software developer.

> Don't they teach this stuff anymore?

I feel like the world could use a series of Katherine of Sky-narrated video tutorials on how to build out real-world infrastructure and supply chains.

"...and now let's see if we can get our shipping container shortage worked out; wait, what's this? Oh no, we've got a ship stuck sideways in the Suez, and all of the stuff and all of the things are stuck in a traffic jam in the Mediterranean and the Red sea. The sadness is real."

Crazy idea: make cars that don't rely on microchips and software. As a bonus, they'll probably last longer, be cheaper to repair, and won't distract drivers as much.

There is software in too many consumer goods, usually with very little benefit to the end user, beyond marketing and being able to justify a higher price tag (oooh, it's a "smart" toaster). I don't need the Toyota equivalent of an iPad on my dashboard.

unfortunately the volume of regulations regarding automotive technology doesn't allow for this. if Toyota or any other manufacturer wants to make a chipless car, first the law makers have to allow them to.

I'm not aware of how you can do emissions monitoring through canbus (required) without chips. not sure how you can do rearview monitors (required) without chips. there are countless other things that are regulated that require chips. and competitor pressure for assisted driving technology like lane assist, blonde side monitoring, navigation/gps/etc all require chips.

the dream of going back to a chipless is a nice one imo, but they are just not legal.

There are some hurdles for sure, but for most of their history cars did not have chips in them, so we must have found a way.

I know for a fact there's a market for this in both cars and televisions.

Here in Toronto, Canada:

One fallout of this is the rise in prices of old / used cars. To give you an idea, a 2018 Toyota/Honda minivan is Canadian dollars 10,000 higher than pre-covid times.

It's ok for folks who have a newish car and want to buy another used car as their current car prices would have increased. But if you are like me, who drives a 15+ year rusty old car and is desperate to buy a 3-4 year old car, then good luck. Not only are the prices much higher (and your car's value is junk) but at the same time, inventory (even for used cars) is super low.

I would have loved to live in a City / Country where car is not necessary but this city I live is built for cars...

Purely as a joke:

Maybe car manufacturers should revive the production lines to produce 1980s Toyota Cressidas, Camrys and Chevy Impalas.

What are the barriers here? As sophisticated as automobiles have become I don't see them needing bleeding edge 5nm fabs.

My bigger question is: Why is there not a thriving "small business" chip fab industry?

My guess it that it is like a refinery, building the factory takes too long with a large capital outlay. For instance, it may take a year or two to build and cost (let's guess) $500M. Now in that time, let's say all the existing players ramp back up (or expand!!) and there is no shortage. You now are producing chips that are cheaper elsewhere and it is hard to recoup your investment. Also, you may be limited on where you can find people with expertise in this area.

In theory you could wire up an old pentium or 386 and program it to do the same thing some of these chips do but you have the same problem there. No on has a 5M supply of 386s just sitting around in good condition.

The minimum cost of entry is in the hundreds of millions to billions, it's not especially environmentally friendly, and you're competing against what would normally be fully-paid-off old production lines from the incumbents.

There's a thriving small business design industry, but the manufacturing is a classical capital-intensive manufacturing business that also requires very specialist staff.

As a chip supplier, I'd be feeling a lot of pressure right now. In the short term you can squeeze and the tail can wag the dog for a bit. But longer term this opens the door wide open for new competitors in the market and / or vertical integration.

I don't think chip suppliers are playing games here, are they?

I think in general all chip manufacturers are at capacity and it comes down to getting in line. And I'm sure many chip manufacturers are trying to expand their capacity. I can't imagine they're sitting there thinking this will last forever.

I'm not sure the reasons for the shortage matter. If you have a dependency that's causing you major problems, you try to become less dependent on it.

> But longer term this opens the door wide open for new competitors in the market and / or vertical integration.

Not really. Chip fabrication requires enormous upstart cost - IIRC, TSMC plans with something like 10-20 billion $ - and a lot of time, to the tune of three years at least (https://pr.tsmc.com/english/news/2033). There are not many companies in the world who have that amount of cash lying around, and even the ones who do like Apple still resort to using TSMC.

Not to mention it's not just the machines from ASML and a host of other vendors plus the cost of building factory-sized ultra clean rooms, but you also need the expert staff trained to operate the entire setup and a lot of fine tuning of parameters which are closely guarded secrets...

> There are not many companies in the world who have that amount of cash lying around

Which is why establishing a chip fab to me seems like an obvious national goal. It's a booming market with costs of entry that few private companies can afford, why not make it a national capability? Resilience and profitability in one package.

Even for a nation, that is a lot of money - Germany's budget is about 500B €, a 10-20 B € investment would be a 2-4% of that.

IT doesn't have to be. You can be producing chips in a month if you are willing to pay. A clean room can be created, and the process of making of making chips one at a time in labor intensive processes is known. Just that nobody is willing to pay $50k each for their chips, and you need to get that price to pay for all the skilled labor to make a chip one at a time in a lab.

It takes years to setup a fab, but in the end it is a lot more cost effective, which is nobody is bothering to do the manual process even though we know it will work.

Maybe? It seems to me the overheads of establishing a fab process anywhere near the incumbents are astronomical. I would guess that even this bottleneck in supply would represent a minuscule fraction of that overhead. What are the actual numbers?

>> Maybe? It seems to me the overheads of establishing a fab process anywhere near the incumbents are astronomical.

It depends which parts are in short supply. A lot of automotive parts are still on 20+ year old nodes. 90nm to 130 or even 180nm. I would guess those are not the parts experiencing shortages though. So that leaves the fancy stuff. Bummer if a car can't be built because the infotainment SoC can't be obtained because it's competing for production with crypto mining GPUs.

> the overheads of establishing a fab process anywhere near the incumbents are astronomical.

That's a big opportunity in itself.

I'm sure someone's trying to spin up a fab right now, but that's inherently not a quick process.

Or cheap. Trying to game a short-term downtick in supply by spending 100 Bn USD only to come out the other side as not competitive when you're up-to-speed and your competitors have an abundance of supply and can undercut you by 20%.

It's not a winning strategy.

There are tons of n-th tier fabs who seen the shortage coming 4-5 years ago, and trying to move the ladder in the legacy processes.

Rushing to compete with them when they had a 4-5 years headstart is not a wise decision.

I've noticed that the shortage of chips is also strongly driven by speculators simply buying up everything in sight and trying to resell at multiples of the cost.

That is a whole different level - consumer retail as added middlemen. Manufacturers who include multiple in one project don't buy just retail which is oriented at one-at-a-time.

You think people are buying up Chips designed to go in to Toyota cars?

Surely they're beyond worthless to anyone but the manufacturer and Toyota themselves?

Parent was speaking of the chip shortage in general, which goes way past cars. Car manufacturers will do what they can to isolate themselves from the open market (and buy the numbers and have the political backing to do so), but demand for non-car parts affects allocation of production capacity to their demands too.

> designed to go in to Toyota cars?

Chips rarely are designed for a specific car, and a car will also contain quite a few that are not strictly specific to automotive.

"Porsche will provide cars with ‘fake chips’ to reduce delivery times"

https://news.ycombinator.com/item?id=28042518

That makes no sense. I wonder what they mean by "fake" chips? Are they simply not placing the chip on the board, or are they using a footprint compatible different chip (unlikely), or are they completely redesigning the board with another chip which has much better availability? (most likely)

Presumably they are building cars but leave entire modules out, and then fit them later as supply arrives. Has some benefits over stopping production, if you can afford to have a stockpile of cars around.

Or leaving out the infotainment system.

I wonder if there will be a long term shift in supply chains toward less "asset light" and more vertically integrated operations with sourcing moved closer to end market demand.

It seems that primary problem isn't chip shortage but other parts shortage made in Asia.

https://asia.nikkei.com/Business/Automobiles/Toyota-to-cut-g...

I was speaking to a car dealer client the other week and heard some funny stories, like selling off cheap batches of vans with various non-essential electronics missing - just holes in the dash - and the promise that units would be available to fit later.

Is there a credible estimate of when the chip shortage is likely to be over?

Digitimes tell of q3-4 2022

On one hand, Toyota buys so many chips that their supplier will probably prioritize their orders.

On the other hand, Tesla is tiny compared to Toyota but is probably more flexible and can adapt faster, e.g by using alt chips with new firmware and by using fewer chips per vehicles (to be proven, but we know Model Y has half the number of ECUs of Mach E / ID.4 for instance).

Also, without dealers, Tesla could better manage their build-to-order system and pricing (to push customers towards high margin vehicles and forgo volume growth while the shortage continues)

>to push customers towards high margin vehicles

Wait, isn't this what people tell us is wrong with dealerships, and why the Tesla method is superior?

Not a sales method, just raising price on the cheapest models. I meant pull not push.

I don't see this raised anywhere -- but what's so bad about producing fewer cars (the poor neglected shareholders and exec bonuses aside)?

It's almost as if we would need to lean into this, reducing growth and producing fewer cars would be in line with efforts to mitigate the drivers of climate change.

What if car manufacturers pivoted their KPIs and focused on making long-lasting, serviceable vehicles? Toyota is already the worldwide leader in these, as evidenced anywhere that's not smoothly paved suburbia-land.

>It's almost as if we would need to lean into this, reducing growth and producing fewer cars would be in line with efforts to mitigate the drivers of climate change.

Newer cars pollute far less than old cars.

>What if car manufacturers pivoted their KPIs and focused on making long-lasting, serviceable vehicles?

They do make long-lasting, serviceable vehicles. Where have you been?

> Newer cars pollute far less than old cars.

More cars pollute more than fewer cars.

>More cars pollute more than fewer cars.

It must be nice to live in a sunny place where you can walk or bike to work.

Unfortunately, the rest of the world, including that which services fancy "green" neighbourhoods, require vehicles.

>(the poor neglected shareholders and exec bonuses aside)

Well, to provide a different perspective, there are car plants around the US that have been shutdown for months and the people formerly employed there haven't been able to work.

Not necessarily arguing that more cars are better, just its not only shareholders and executives who are hurt by the chip shortage.

Used car prices was up something like 90% and even renting cars is way more expensive already. This is just going to further constrain supply.

I tried renting a car and despite being sold out in the vast majority of places well ahead of time it was 2x the normal base price.

Consider for a moment the people outside the developed world whose lives are greatly improved by cars.

Scarcity drives prices up putting things out of their reach.

Cars tend to diminish quality of life. Local, walkable and cyclable neighbourhoods on the other hand enable people to flourish. When people have to travel by vehicle, trains and trams are superior to cars.

Cars are only diminish quality of life when there are too many in a given area. For every person along the way though a car is a greater improvement than no car. Sure each one harms the overall quality of life, but the individual is better off.

how do you propose people in rural Africa transport their goods to markets? Cycle and trams? Perhaps electric buses?

Have you even been to the developing world? We mostly drive old junkers that were discarded by Americans and Europeans after 15 years of use for breaking and polluting too much.

Need to keep that supply of junkers coming though!

this comment is a textbook example of how out of touch many here are.

The developing world also makes cars. India - to name just one - is among the largest exporters of vehicles to several countries in Africa.

No, people in the developing world do not drive hand-me-downs from the West.

Can someone explain to me why this wasn't the case before covid? Are the companies who are ahead of the automakers "in line" ordering more than before covid?

Cars are not a large market compared to cell phones and other users of ships. Cars are louder than the rest, but not bigger.

They typical car lasts 10-15 years. Cell phones about 2. More people have a cell phone than a car. Sure the car has more chips, but not by enough to make them bigger than phones. (Phones and cars mostly don't use the same process)

Simplest answer: Demand has gone up overall for technology like tvs, computers, game consoles, etc... Meanwhile, during covid the ability to scale (production and supply chain) to meet that demand has been difficult.

Ordered a Yaris Hybrid in June.

Still no info on the order, except that the factory in France is on shutdown in August till the 23rd. Except:

> Until now, Toyota had managed to avoid doing the same, with the exception of extending summer shutdowns by a week in France

Which means it reopens in September...

> Toyota is to slash worldwide vehicle production by 40% in September because of the global microchip shortage.

Oh boy. Hopefully my order is in one of the first in the queue.

Yaris isn't a Toyota. Its made by Mazda and they slap a Toyota logo on it. I wouldn't worry.

Not true for the European market: https://en.wikipedia.org/wiki/Toyota_Yaris_(XP210)

> Taiwan Semiconductor Manufacturing plans to build new factories in the US and Japan

I can't help but think that this massive shortage is setting up and equal an opposite reaction 2-3 years down the road: a glut as all this new capacity comes online. Especially given that because companies are now scrambling for chips, they're likely to over-order to ensure future supply.

There is a lot of scalping going on. I keep an eye on certain parts and as soon the stock comes up, it disappears within minutes. Then you can buy all those chips on AliBaba at 10 times the price. I think government should look into that as this is a huge problem for many businesses.

So the new car thief will yank the computer(s) out of newer cars, sell them on the black market.

No, because the computer is tied to the VIN, and you need a dealer to change that. Dealers will check to see if the VIN is stolen.

Not all cars have that, manufactures have been using the above to stop theft for years.

My Toyota Prius is still sitting around without a catalytic converter on it. Procrastinating because I'm not being called back to the office yet.

I looked for a simple non-electronic car recently to buy, and found out that the government has mandated numerous safety systems requiring electronics like backup cameras, no seatbelt alarms, blind spot monitoring, lane assist etc, and in the upcoming infrastructure bill there is a rider to add breathalyzers to every new car made in America. (ref below)

Is there an officially designated cost/reduced risk ratio that policy makers can go by to determine if a regulation is worth while?

Is a regulation that costs 1 billion dollars to save 10 lives at 100 million a life considered worthwhile?

Is a regulation that costs 1 billion dollars to save 1 million lives at a cost of 1000 a life worthwhile?

Is there even an officially designated cost per life saved for new safety regulations?

If not it seems like a slippery slope, and the government can never overreach as long as it can justify the regulation by saying it saves a single life.

Reference: https://time.com/6086981/bipartisan-infrastructure-bill-brea...

The DOT and the NHTSA considers that value to be $6.3 million per "statistical life" in 2009 dollars [1]

[1]: https://www.nhtsa.gov/staticfiles/administration/pdf/Value_o...

You might want to look up the marginal cost of a backup camera what with CCDs these days

The manufacturers add a significant markup I imagine.

My original point is what's the cost benefit ratio boundary of enforced safety laws?

Why though? There’s more cars in America than drivers.

Let’s reduce safety regulations because people want new cars?

Let’s reduce safety regulations to save corporations money?

@kliment had a pretty good summary on this:

https://news.ycombinator.com/item?id=26931498

Its really bad, we have 1 main dealer around us with uusally over 1000 in stock in normal times. They only have 4 cars in stock, all Avalons.

And here I was picturing a 4-axis machine...

This is a huge deal, imagine that the production of one Apple AirTag means one less vehicle produced.

I'm sure a car has many more chips than an AirTag.

What are these chips and what is preventing us from scaling up capacity? I’m not challenging that it’s difficult, but the reporting seems shoddy. Maybe I’m the only one who wants to understand this stuff, but these kinds of questions always seem obvious to me (same with COVID vaccine manufacturing).

Here’s a good rundown: it ultimately all comes back to chip fabs being huge operations with massive upfront costs which makes them sensitive to both the pandemic’s direct effects and secondary problems like the way the auto manufacturers slashed orders in 2020, forcing the chip manufacturers to sign other contracts to avoid idling that much capacity[1], and unrelated problems happening at the same time like cryptocurrency pulling capacity away from useful applications.

https://www.eetimes.com/the-chips-are-down-with-no-relief-in...

1. I’m not sure how much of this has been independently verified but this commenter blames the auto manufacturers heavily: https://news.ycombinator.com/item?id=26931498

That's a really good HN comment, thanks for sharing!

Does anyone know the particulars of the shortage? Talking more about the commodity chips. Very hard to get anything from TI, ST or Microchip. Which fabs and nodes are specifically overloaded?

I'm not sure if this will answer your specific questions, but I found this HN comment from a few months ago to be some very interesting background:

https://news.ycombinator.com/item?id=26931498

Not nodes, wafer sizes. Most severe shortages are on 200mm.

200mm had 12 month lead times before COVID, now we talk about years.

As Taleb likes to say, an efficient system is the opposite of a robust system, kind of by definition.

We are now witnessing the effects of our modern hyper-efficient just-in-time global manufacturing system.

Actually, Toyota moved away from JIT after 2011 earthquake when several of it’s factories had to stop production due to lack of parts from other factories impacted by earthquake. One of the change was increased inventory levels of components.

Toyota is one of the last automaker to reduce production due to the current chip shortage, because they had enough chips for 18-24 months of production.

Edit: It seems some of Toyota factories in Southeast Asia have shutdown due to Covid spread in those countries resulting in shortage of parts supplied to factories in Japan. Reported to be 40% reduction in production.

Actually Toyota's manufacturing process was changed after Fukushima and was one of the only companies that plans for situations like this: https://www.autoblog.com/2021/03/09/toyota-how-it-avoided-se...

Edit, what the other poster said.

yeah, but about everyone else?

They now learn the lesson Toyota learned in 2011.

Relevant: The Security Value of Inefficiency by Bruce Schneier

> This drive for efficiency leads to brittle systems that function properly when everything is normal but break under stress. And when they break, everyone suffers. The less fortunate suffer and die. The more fortunate are merely hurt, and perhaps lose their freedoms or their future. But even the extremely fortunate suffer — maybe not in the short term, but in the long term from the constriction of the rest of society.

https://www.schneier.com/blog/archives/2020/07/the_security_...

Will the car price starts to increase due to the chip shortage?

Price increases already happened in the US for used cars. This will only continue the premium for used cars.

Why is it not affecting new car pricing as dramatically? And why would that continue? Used car prices cannot surpass new car prices surely, so at some point new car prices will be raised because of the low supply and high demand, or new car orders won't be fulfilled for months later

Used cars have surpassed new car prices in the past. Generally because new cars can't actually be bought at any price. A car today is sometimes worth more than a better car that doesn't exit.

Can someone explain, why this is not reported as in what inflation looks like ?

when Supply cant meet demand we get higher prices, what am i missing here ?

That's not really the usual concept of "inflation". Every commodity fluctuates in price. Inflation is when the price of a unit of money falls. Conceptually, it's very easy to distinguish "cars cost more dollars because cars are more expensive" from "cars cost more dollars because dollars are cheaper". In practice, it's difficult to measure the value of a dollar. But in general, inflation looks more like the price of everything going up, and less like the price of cars going up.

(Currently, a lot of different prices are going up, and current inflation is high. But you can't just point to Toyota raising prices and say "See? This is what inflation looks like!" That is what inflation looks like, but it's also what not-inflation looks like.)

>Can someone explain, why this is not reported as in what inflation looks like ?

What do you mean "this is not reported"? Are you actually looking at the BLS inflation reports?

The fact is, semi-conductor price increases make up a tiny proportion of the average person's cost of living.

Has anyone considered redesigning the car to not need these particular chips?

Do a massive push to target a different chip or even a FPGA. There must be something out there to run the software.

Good! Toyota has been sabotaging clean cars because they can't compete [1][2].

Most well known car brands have great electric cars now, but Toyota and their oil lobby buddies are trying to halt the progress. The decline of Toyota sales is good news for the world.

[1] https://www.nytimes.com/2021/07/25/climate/toyota-electric-h...

[2] https://insideevs.com/features/524481/toyota-hybrid-pioneer-...

Please write back when Tesla learns how to correctly apply paint to a car or fit body panels, or well, pretty much everything else that makes an actual car a car instead of a disposable gadget.

The concerns you express aren't noticable or bothersome except to a small percentage of enthusiasts. Teslas are mechanically far more reliable and require less maintenance that other cars.

The data doesn't bear that out. Tesla's have consistently ranked near the bottom in reliability surveys and indexes. They're amazing cars, but they've got a long way to go on the build quality and reliability measures.

If anything, Teslas are bought by enthusiasts. Tech entusiasts, not car enthusiasts, but enthusiasts nonetheless.

Regular people definitely care how well their cars are put together, right after they care about the car's 1) price and 2) look.

They have not even been out long enough to make that claim. Especially when comparing to Toyota.

Most people would consider the ability to put together the stuff you do see as a pretty good indicator of your ability to put together the stuff you can’t see.

I guess you’ve never owned a car made by a car company before.

Tesla does not equal electric cars. Most well known brands have great electric cars now, not to mention all the new brands like Nio and Polestar.

If I read your exuberance incorrectly, I apologize.

Toyota has a lot invested in the hybrid architecture. I doubt they’ll go full electric for some time and frankly it won’t make sense to do so for another 10 years.

Still, there are a lot of great options out there right now. For example, the Bolt from GM is a great little car. I inspected one up close two weeks ago side by side with a new Model 3. While not a great comparison in terms of function, the build quality in the GM model was just vastly superior by nearly every measure.

Ah yes, the most important function of a car, the paint...

The tone of GP is poor, but yes, the paint is really important if you want your car to last more than 5 years, especially if you live near the sea. And if you only take your car out on weekend and summers and can not put your car in a garage, a poor paint job will cost you even more.

If you want a car to last more than five minutes, then yes, paint is very important

Rust is a thing.

Large-battery EVs (LBEVs) are an unscalable luxury, both for cost and recharging infrastructure. Even if Toyota has chosen to advance its interests more aggressively, the criticism of the EV market is valid.

The electrical infrastructures of the US and the EU are not able to support a total adoption of EVs, especially not LBEVs. Consumers appear to be choosing LBEVs, not small-battery EVs. They want range even though most people need only a range of less than 100km. [1]

Toyota's (or anyone else's) hybrid vehicles are a better choice for combination short-range/long-range drivers, where short trips are clean, and long trips use the energy density of petrol.

IMHO what Toyota should be doing is adding a larger battery to its hybrids, e.g. 17 kWh instead of 8.8 kWh. I believe the Honda Clarity has a 17 kWh battery.

From your articles:

“Toyota’s view is also that countries are jumping in with the idea of the electric-vehicle endgame without a real plan, and it’s more political showmanship than sound planning,” Mr. Liker said.

Toyota will inevitably be marketing EVs, though.

"For one, China, an important market for Toyota, has moved aggressively to require automakers there to make electric vehicles. That has spurred Toyota to start producing electric cars under a joint venture."

[1] https://www.greencarreports.com/news/1128626_why-you-really-...

Toyota is not "sabotaging clean cars", only trying to delay regulations.

So not sabotaging, only obstructing. I'm so pissed at all the auto-makers (with the exception of Tesla). The writing has been on the wall for at least a decade in large neon letters, but they all seem taken by surprise that they suddenly have to produce electric cars.

This still is not "obstructing". Only it is trying to slow down coercive mandate alone, no obstacle to consumer buying an electric car on own initiative!

Psst you can avoid all of those issues by not buying Toyota. Stop trying to regulate everyone else into what you want. If these EV's are so good it shouldn't be an issue at all.

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