As the global component shortage continues, German chip giant Infineon urges automakers to reconsider their "just-in-time" supply chain strategy and start building semiconductor inventories instead.

According to the Nikkei Asian Review, Helmut Gassel, Infineon’s chief marketing officer and member of the management committee, said that the company is a leading automotive chip supplier and the tight supply of chips is expected to continue until the end of next year.

Gassel said that Infineon is struggling to cope with the problem of low product inventory levels in multiple industries, and the shortage in the automotive industry is the most obvious.

It is understood that "just-in-time" (just-in-time) supply chain management—that is, the delivery of parts according to assembly needs has always been a standard in the automotive industry because it helps minimize inventory and increase efficiency. However, the global chip shortage that occurred last year has already had an impact on the supply chains of multiple industries, leading some people to start advocating for new strategies.

Gassel pointed out that the most scarce chips in the automotive industry are logic chips manufactured using several generations of old technology, especially those 20 nanometer to 100 nanometer chips, which are embedded in microcontrollers that are widely used in automobiles.

Gassel emphasized that Infineon is working with as many manufacturing partners as possible to ensure more production capacity. Nevertheless, Infineon expects that the chip shortage in the automotive industry will continue until 2022 or even the end of 2022.

"The semiconductor industry is highly capital-intensive, which means that unused equipment will be very expensive. Therefore, it is difficult for the industry to maintain sufficient excess capacity to cope with unexpected events such as sudden surges in demand or large-scale shutdowns. These two situations are in the new crown. It happened at the same time during the pandemic," Gassel said.

In addition, Gassel said that inventory levels in the automotive industry are particularly low because they are often accurate, but this needs to be changed. Due to the long delivery time of semiconductors and it takes a long time to build additional capacity, it makes sense to have a reasonable amount of inventory in the automotive supply chain to buffer the additional demand.

Gassel warned that if no action is taken, the situation may worsen in the near future. For example, when you switch to electric cars, the value of semiconductors used in cars will double. When we enter self-driving cars, we will almost repeat the same mistakes again.