About two months ago, the managing directors of Ford engine and GlobalFoundries, a semiconductor supplier, spent hours discussing the chip shortage that annoys automakers and disrupts production around the world.
On Thursday, the companies announced the outcome of that meeting – a collaboration aimed at increasing chip manufacturing in the United States and improving the supply of critical parts to Ford.
ford said in a statement that it and GlobalFoundries have signed a non-binding agreement to work together to develop chips for Ford vehicles and that the companies would look for ways to expand US chip production.
“It is critical that we create new ways of working with suppliers to give Ford and America greater independence in delivering the technologies and features that our customers will value most in the future,” said Jim Farley, chairman of the board from Ford. “This agreement is just the beginning and an important part of our plan to vertically integrate key technologies and capabilities that will differentiate Ford far into the future.”
The companies plan to continue discussions on specific ways to increase chip production in the United States. They declined to elaborate or to say whether Ford could invest in a new semiconductor factory with GlobalFoundries. The current letter of intent does not provide for any cross-participation by the companies.
Thomas Caulfield, CEO of GlobalFoundries, said the agreement will encourage innovation and “ensure a long-term balance between supply and demand”.
Ford and other automakers have had to shut down vehicle plants at times this year because they couldn’t get enough computer chips – the brains needed to control engines, transmissions, brakes, infotainment systems, and more.
General Motors is also in talks with chipmakers about ways to secure enough chips to keep its factories running. “We are specifically working on a strategy to ensure that we don’t see these kinds of restrictions in the medium term and certainly not in the long term,” said GM managing director Mary T. Barra on a conference call last month.
The chip shortage in the auto industry dates back to the beginning of the pandemic when car factories closed for about two months to prevent the coronavirus from spreading among workers. At the same time, sales of computer and game consoles soared, and their manufacturers increased semiconductor orders. When the automobile manufacturers resumed production, the chip suppliers only had a small amount of capacity left.
Ford was particularly hard hit at the beginning of the year when a chip factory of one of its most important suppliers was shut down by fire. In the second quarter, it was only able to produce about half as many vehicles as originally expected, although its range of chips has steadily improved since then.
GlobalFoundries was created in part through the acquisition of factories formerly owned by chipmaker Advanced Micro Devices and IBM. The company went public in October and is investing heavily in expanding its production.
Mr. Farley visited Mr. Caulfield at the GlobalFoundries headquarters near Albany, NY, in September to discuss how the companies could work together, such a person familiar.