Chip makers have a message for car makers: Your turn to pay

Newly created teams at the likes of General Motors, Volkswagen and Ford are negotiating directly with chipmakers

The shortages of computer chips that forced global automakers to scrap production plans for millions of cars over the past two years are easing - at a new and permanent cost to the car companies.

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What had been “war room operations” to manage chip shortages are becoming embedded features of vehicle development, say executives in both industries. That has shifted the risks and some of the costs to automakers.

Newly created teams at the likes of General Motors Co , Volkswagen AG and Ford Motor Co are negotiating directly with chipmakers. Automakers like Nissan Motor Co Ltd and others are accepting longer order commitments and higher inventories. Key suppliers including Robert Bosch and Denso are investing in chip production. GM and Stellantis have said they will work with chip designers to design components.

Taken together, the changes represent a fundamental shift for the auto industry: higher costs, more hands-on work in chip development, and more capital commitment in exchange for better visibility in their chip supplies, executives and analysts say.

It is a U-turn for automakers who had previously relied on suppliers – or their suppliers – to source semiconductors.

For chip makers, the still-developing partnership with automakers is a welcome - and overdue reset. Many semiconductor executives point the finger at automakers’ lack of understanding of how the chip supply chain works – and an unwillingness to share cost and risk - for a large part of the recent crisis.