After Halting Vehicle Production and Closing Factories in Brazil, Ford Enters Chip Market to Enhance Competition and Resolve Production Crisis in the Automotive Industry

Ford Chief Says Initiative Represents “Just The Beginning” Of The Business And Is Part Of The Company’s Supply Chain Strategy To End Production Crisis.

After halting vehicle production and closing factories in Brazil in recent months, Ford had to significantly reduce its output, resulting in million-dollar economic losses, due to the semiconductor chip shortage that triggered a crisis affecting numerous companies across various sectors of technology.

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To resolve this problem, Ford Motors announced a strategic agreement with GlobalFoundries (GF), a company dedicated to the design and production of semiconductors. This way, it is expected to secure chip supply while presenting the opportunity to design exclusive chips for the automaker.

Ford’s President and CEO, Jim Farley, stated in a release that the supply agreement with GF, based in New York, represents “just the beginning” of the business and is part of the company’s plan to “vertically integrate key technologies and capabilities,” although this announcement does not reveal financial details or the date when GlobalFoundries would start supplying semiconductor chips to the automaker. These chips would be used for advanced driver assistance, battery management, and network systems.

“It is critical that we create new ways to work with suppliers that give Ford and the United States greater independence to produce technologies and resources that our customers will value most in the future,” Farley said in the statement. Both companies claimed that such an agreement would allow GF to “create an increased supply of semiconductors for Ford’s current range of vehicles” as well as the possibility of “joint research and development” to respond to the demand for chips in the automotive sector.

The Shortage Did Not Just Affect Ford

Far from being a problem of a single company, the chip shortage has generated consequences for numerous businesses and has prompted different sectors to take action on the matter. Similarly, so far this year, U.S. President Joe Biden has announced measures to increase semiconductor chip production in that country.

According to a report published in September by the consulting firm AlixPartners, the chip shortage worsened by the pandemic will cost the automotive sector about $210 billion globally and will result in 7.7 million fewer vehicles being produced than expected. In light of this scenario, the demand for components becomes increasingly urgent, and the measures taken are a viable solution, but the recovery of the sector will be slow, which according to the firm, will not be seen until at least the second quarter of next year and “will likely extend a bit longer.”