By Hyunjoo Jin

SAN FRANCISCO – Automotive chipmakers such as General Motors (NYSE ), Ford Motors (NYSE ) and Hyundai Motor believe there will be a two-year chip restriction. But, the automotive chipmakers expect a slower recovery.

GM CEO Mary Barra forecast that there would be a decrease in semiconductor supply in the second-half. Ford predicted a dramatic improvement in second-quarter vehicle sales after a lower first quarter. Hyundai suggested that chip supply would rebound to normal levels by the end of the third quarter.

Leading automotive chipmakers, such as NXP and Infineon (OTC) expect a supply glut to continue despite increased production.

Uncertainty about the industry’s recovery from the coronavirus outbreak has gotten worse. It also risks hindering efforts to shift to chip-intensive technologies like electrification, safety, and driving-assistant technology.

According to AlixPartners, the chip shortage in 2021 will result in a $210 billion loss in revenue and a 7.7 million vehicle production reduction.

According to automakers, however, the tides are turning.

Tesla (NASDAQ:), which managed chip supply last year using strategies that included writing new software to deal with changes in chips’, anticipates that the chip shortages this year will last until they ease next year.

Elon Musk, Chief Executive Officer, stated last month that the shortfall was temporary. There were factories growing in capacity while automakers panicked about buying chips to slow down the supply chain.

Investors heard him describe it in simple terms.

I think that there is some toilet paper problem. There was an obvious shortage of toilet paper during COVID. But it wasn’t a significant increase in the need to wipe. People panicked …”

Qualcomm, chip firm (NASDAQ) is optimistic.

According to Akash Palkhiwala (chief financial officer at Qualcomm), “I think that a lot if our peers together with us are prioritizing shipping and the auto business as much as possible.”

MATURE CHIPS

However, the leading automotive chipmakers were more cautious.

Infineon announced Thursday that while the supply/demand balance will improve for some chips in the second half, the market place for mature chips — which are crucial to automakers–will remain tight.

Reinhard Ploss from Infineon, the CEO said that “supply limitations are far away over” and would continue into 2022. Infineon worries that China could shut down its factories due to Omicron COVID-19, which is China’s zero COVID strategy.

NXP stated that the industry will not be able to overcome the current supply-demand imbalance.

Semiconductor companies have an incentive of focusing on the most valuable chips. Apple Inc. (NASDAQ:)’s Tim Cook indicated that while there is improvement in the quarter, “legacy nodes,” which are less complex chips for power management, were facing significant supply restrictions.

“There are a couple of the fabs that are going to come online towards the end of the year that will help those markets but not fully solve the problems,” said Peter Hanbury, a partner at Bain & Company.

STMicroelectronics stated that a chip factory can take several years to construct and another two to reach maximum capacity. In November, the company stated that a significant increase in production capacity would not be possible until 2024/255.

Ford has partnered up with U.S. chipmaker GlobalFoundries in order to decrease Taiwan’s dependence on TSMC for older technology chips. Ford chief executive James Farley called the partnership “feature-rich”.

“We are very dependent upon TSMC for feature-rich nosdes. Farley spoke on a conference phone that the industry is moving to better nodes and this puts the ability at risk.

Ford said he would use cash to pay GlobalFoundries for older node chip chips, but it will be a while before the Chipmaker can build them in the United States.

He said that he has learned from experience that it is impossible to manage the supply chains for key components in the same way that we did. This was crucial to the digitalization and vehicle electrification transition.