Around the world, automakers are dealing with a worldwide shortage of computer chips. 

Last month, Volkswagen sounded the alarm about the rising problem. More car manufacturers are now reporting issues, including a temporarily shut down Ford plant in Kentucky, a Jeep plant in Mexico that prolonged its holiday shutdown, and other factories that are trimming production plans based on their semiconductor supply.

 

Last year, when the pandemic stopped the production of vehicles, everybody expected a prolonged slowdown in car sales. Accordingly, the global semiconductor industry prepared and planned to sell to other customers more computer chips. 

But then, to the surprise of everyone, shoppers were still ready to purchase new vehicles. Plants continued regular production at a remarkable pace as soon as they re-opened.

To satisfy all this demand, chip manufacturers are working to increase production. But it is very difficult to make computer chips. It can cost tens of billions of dollars to build the fabrication plants where they are made. 

The global supply chain just couldn't keep up, according to Continental, a major supplier of auto parts to carmakers.

For car buyers, for the next few months, this could mean that certain vehicle models are more difficult to find. There are entire plants on pause for Ford and Fiat Chrysler.

The United Auto Workers, GM, and Fiat Chrysler factories, says that "unemployment and supplemental pay" for workers affected by production downtimes are included in its contracts. 

For semiconductor producers, meanwhile, this crunch poses new possibilities.
 

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Apple, the world pioneer in information technology, is highly likely to get into the automotive market. The American company is currently planning to use a business model similar to its iPhone output to build self-driving electric vehicles produced by an automaker under a tie-up agreement. 

A potential Apple Car is believed to have an impact on the automotive industry's competitive environment.

 

Following stories by Reuters and Taiwanese news media on Apple's potential entrance into the auto industry, U.S. and Chinese high-technology companies' share prices shifted uphill.

In the US, strong investor interest has been attracted by companies such as Velodyne LiDar, a manufacturer of light detection and ranging (lidar) sensors that serve as the "eyes" of self-driving cars. In China, investors rushed to the world's largest electric vehicle battery maker, Contemporary Amperex Manufacturing, and other suppliers of EV-related components.

An Apple Car will be a "collection" of high technology, said analysts at American and European auto market research firms, indicating that it is possible to shift suppliers of key automotive components.

Through the use of smartphone creation and manufacturing know-how to build automobiles and through the horizontal division of production, the Apple EV project is expected to have a more serious impact on the car industry. Though outsourcing manufacturing to businesses such as Hon Hai Precision Industry, a top Taiwanese electronics contract manufacturer, Apple will likely concentrate entirely on designing vehicles.

Apple is expected to commit itself, as in the case of iPhones, to overall design work, including self-driving technology, while outsourcing manufacturing. The strategy is likely to shake the current vertical integration business model of the auto industry, in which carmakers participate in the entire process from concept to production.

In China's auto market, the horizontal division of labor is already progressing. Baidu, a top Chinese internet company leading the development of self-driving technology, revealed on Monday that it would manufacture EVs on an original-equipment-manufacturing basis with Zhejiang Geely Holding Group, a major automaker in China.

Magna International, a leading Canadian supplier of automobile parts that has progressed on behalf of car manufacturers to produce vehicles, is seen as a leading contender for producing the Apple Car. Allegedly, Taiwan's Foxconn, which has collaborated with Apple in the development of smartphones, also wants to win the contract.

The Apple initiative has gained attention from automakers as well. South Korea's Hyundai Motor said Friday that it is in early talks with Apple over a tie-up to create an EV. If obtained, a large order for the manufacture of the vehicle would likely allow Hyundai to increase its capacity utilization rate and stabilize earnings.

But the project may threaten the dominance of carmakers at the top of the sector. An executive at a major Japanese carmaker cautioned that automakers can "become Apple's subcontractors and lose their originality."

On behalf of Didi, BYD agreed to manufacture EVs because it can expect to benefit by growing performance, an analyst from the auto industry said. 

Although Asian businesses are beginning to move in an effort to capitalize on the Apple Car project, the question is whether Japanese companies are ready for it. 

As in the case of smartphones and consumer electronics, there remains fear that Japanese companies will lose the initiative to Chinese and South Korean rivals.
 

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Foxconn Technology Group, the Taiwanese manufacturing affiliate of Apple, is setting up a car firm, reinforcing its automotive capabilities at a time when technology firms, including its California ally, are looking to grow vehicles.

According to a statement from the companies on Wednesday, Foxconn is joining forces with Chinese carmaker Zhejiang Geely Holding Group to provide global automotive companies with manufacturing and consulting services. 

Foxconn has been steadily bulking up its automotive muscles despite news of Apple considering producing its own electric vehicles. Such moves may help the company become a strong player for its largest customer to produce cars.

An Apple car will rival Tesla's hybrid cars and carmakers' offerings such as Daimler and Volkswagen.Apple will take at least half a decade to deliver an autonomous electric vehicle with development work still at an early stage. That indicates that the company is in no rush to settle on possible partners in the auto industry.

Hyundai Motor backed off a statement last week confirming that it is in talks with Apple, saying that possible partners for the production of autonomous electric vehicles have approached it. 

In October, Foxconn, whose main arm is Hon Hai Precision Industry, introduced its first ever EV chassis and software platform to help car manufacturers bring models to the market more quickly.

In April, it aims to launch its first development package, with Hon Hai Chairman Young Liu saying EV-related company would be "very good" in the first half. Meanwhile, Foxconn's main subsidiary, Foxconn Technology, is allegedly expanding a plant to produce metal parts for automobiles.

An Apple car will compete with Tesla's electric vehicles and products from companies like upstart Lucid Motors and existing producers like Daimler and Volkswagen. It can cost billions of dollars and take years to set up a car factory, perhaps the reason Apple talks to potential manufacturing partners.

Instead of its own vehicle, Apple continued to explore developing its self-driving car system with a third-party car partner, the familiar individuals said, and the company could ultimately abandon its own car efforts in favor of this strategy.

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