Taiwan Semiconductor And The Auto Semiconductor Shortage: Why We're Here, Why Biden Can't Fix It, And The Winners

Summary

• The automotive industry is at a standstill because it lacks the semiconductor components needed to assemble vehicles.
• The blame is being pointed at semiconductor manufacturers, but, in reality, the two strategies employed by either industry are at natural odds.
• The US government wants to throw money at the problem, except it's impossible to relieve the constraint this year.
• But no matter what, three companies will come out as winners and one will see its leadership position solidified further.
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Car manufacturing companies, which I'll refer to using their native nomenclature of OEMs (Original Equipment Manufacturers), are in a post-pandemic situation they didn't expect. They're missing components to restart production because they didn't take the time to calculate their production model against another industries' production model properly. The economy is ready for them and to stay in business they need semiconductor components, but to get these components they must wait and remain paused. Semiconductors benefit in all facets of this as every industry is now knocking on their door and governments want to throw money at them to fix it.

(Source: NXP Semiconductor's Press Release)

The problem is... this situation can't be fixed today.

This can be a confusing situation and unclear as to who dropped the ball and who should (can) pick it up again. I'll walk through how auto OEMs got here, where they are now, how nothing will change even with the Biden administration taking a "look" into supply chains, and, finally, which semiconductors stand to benefit the most.

How Did We Get Here?

When OEMs stopped production and waited out the pandemic, they didn't count on the higher dependency and semiconductor strategy of production of chipset hardware, electronic components, and various other logic chips to restart their production lines once demand returned. As an industry, OEMs implement strategies to keep costs down and make the production line efficient for inventory and financial agility. Because of this "just-in-time" manufacturing strategy, inventory is kept low and is close to a made-to-order production line.

My father works for a US-based metal parts stamping company that supplies these OEMs directly as well as other part vendors such as Bosch, ACDelco (GM), and NGK (OTCPK:NGKSF) (OTCPK:NGKSY). The company supplies small metal parts and components to assemble

Analyst’s Disclosure:I am/we are long INTC, NVDA, TSM, TXN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.