How Tesla pivoted to avoid the global chip shortage that could last years

By Fred Lambert

Tesla explained how it pivoted to avoid the global microchip shortage that Intel now says could last for several more years.

The pandemic has resulted in an increase in demand for many electronics and computers that the supply chain couldn’t handle, especially the semiconductor industry.

This microchip shortage, in turn, affected the automotive industry, which has increasingly become a big consumer of microchips.

We previously released a deep-dive report on how it is affecting electric vehicle production as several automakers had to halt production until chip supply could catch up.

Pat Gelsinger, CEO of Intel, one of the biggest semiconductor companies, recently said that it could take a “couple of years” for the industry to catch up to the surging demand.

Tesla was also affected by the chip shortage.

During Tesla’s Q1 2021 earnings call last week, CEO Elon Musk said that Tesla had some very important supply chain issue, mentioning the chip shortage, and even compared Tesla’s logistics difficulties to World War 2 logistics challenges:

“This quarter, and I think we’ll continue to see that a little bit in Q2 and Q3, had some of the most difficult supply chain challenges that we’ve ever experienced in the life of Tesla and same difficulties with supply chain, with parts — over the whole range of parts. Obviously, people have heard about the chip shortage.”

Tesla uses several chips inside its vehicles for different control systems and its infotainment system. Most famously, the automaker uses a chip that it designed itself for its self-driving software.

That chip is produced by Samsung.

Interestingly, Tesla disclosed that it managed to avoid being too affected by the chip shortage through pivoting to microcontrollers and developing new firmware to work with new chips from different suppliers.

The company wrote in its shareholders letter:

“In Q1, we were able to navigate through global chip supply shortage issues in part by pivoting extremely quickly to new microcontrollers, while simultaneously developing firmware for new chips made by new suppliers.”

The automaker did note that the supply chain issues could still affect them through the next few quarters, but Tesla only had to close its Fremont factory for a few days last quarter, which is not as bad as the production halts that some other automakers are reporting.

Electrek’s Take

I don’t know about logistics issues comparable to WWII, but the supply chain pivot that Tesla did to avoid the bulk of the chip shortage is impressive.

Tesla is showing the advantages of its startup mentality to move quickly and stay nimble.

This could be a big deal in the next few years if the chip shortage indeed persists like Intel predicts.

What do you think? Let us know in the comment section below.

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