Companies Are Hacking Their Way Around the Chip Shortage

As the global chip shortage stretches toward the two-year mark, manufacturers are pulling some unusual tricks to keep production lines moving. Carmakers are using transistors taken from washing machines, rewrite code to use less Silicon, and even shipping their products without some chips while promising to add them in later. Everyone is being forced to adapt to the shortage of semiconductors.

Bill Wiseman is a senior partner at McKinsey.

The team McKinsey created to source chips for the companies it consults for was created with the sense of urgency in mind. The team will look beyond the usual supply chains and find chips in countries such as the Netherlands and Japan. They were able to identify chips that were slightly different from what was originally called for. Companies have little choice but to pay a premium, and the chips actually are out there.

Desperate measures can be taken in some cases. Peter Wennink, CEO of the Dutch company ASML, which makes the complex machines needed to mint cutting-edge computer chips, revealed another example last month. One large industrial conglomerate had to buy washing machines just to get the chips inside them for its products.

The shortage of chips was caused by a number of factors, including a rush to buy electronics needed to work from home in the Pandemic, a hoarding of chips caused by trade tensions between the US and China, and a disruption to flow of components through a complex Semiconductor supply chain distributed around

The crisis has shown how brittle the supply chains are. Consumer electronics, energy, and automotive are some of the industries that have been badly affected. Car makers stopped production and canceled orders for chips at the beginning of the Pandemic, before being caught off guard by an increase in demand. Since falling to the back of the queue for chip orders, auto firms have been struggling to catch up.

Carmakers are stripping features from their vehicles rather than closing production lines. Cadillac said it would remove the hands-free driving feature from some vehicles. In November, the company started selling cars without ports. Ford said in May that it would ship some models without chips for noncritical features, like heating controls, at a later date.

Many companies are changing their code so that it works with different chips, and so that a single chip does double the work, according to Mike Juran, CEO of Altia. Juran says that companies are using chips that are as old as 10 years old.