How Tesla/ Elon Musk is overcoming the global chip shortage
There is
a global chip shortage and Tesla seems not to be affected.
The recent
Q4 reports tesla released on vehicle production shows an increase of 87% and 5%
more than the wall street journal projected one earlier in the year. So how is
tesla managing to bypass the global chip shortage whereas other companies’ production
dipped in the year 2021.
Here is
how.
First Tesla
does not make their own chips in-house as many people presume all they do is the
design of their chips and a third party does the production. So why don’t they
make their own as many people assume? Because having an in-house chipmaking department
is not only impractical but also a very difficult, expensive, and time-consuming
process.
Chips are
made in Foundries that are slow and inefficient and require intense planning to
build and a time period of up to 10 years and a huge cost of 10 to 20 billion
dollars. In comparison, it takes tesla 1 to 3 years to plan build, and start
manufacturing in a Giga factory. Another reason not to add a foundry in a Giga
factory is the high vibrations and noise in car manufacture which isn’t a
conducive environment to making a chip. Chips also require very clan environments
cleaner than surgical rooms and considering all departments of tesla manufacturing
they are not as conducive.
Almost all electronic
devices made nowadays come with a chip, and with very few companies in the chip-making business competition is stiff for all available chips in the
marketplace. And as the pandemic hit the globe in 2020 most car companies became
worried, and canceled all their microchips orders. This basically shows how
many car companies didn’t value the chip-making process and short-sighted business
decisions. On the other hand, tesla didn’t cancel their orders but increased
them and somehow got better prices and moved ahead of the pack. And when other
others came back, they had to line up as more appetite for chips had grown due
to increased devices requiring them.
That’s one
of the few reasons why many vehicle companies are doing away with many features
on their vehicles that don’t seem so necessary. Also, Tesla has been hit
with the same problem but not as severe as the others.
Another reason
is tesla is a technological business first before a car company and hence steps
and years ahead of the competition. This gives them an edge in any decision-making
involving technology. And before this shortage is addressed Tesla will still
remain ahead of the pack.
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