LONDON – That flapping sound is being made by the wings of supply-chain pigeons coming home to roost and the pages of lesson books that executives in various industries have forgotten or are too young to have learned.
But I guess it had to happen sooner or later. The booming and globalized electronics industry has finally run out of headroom and out of chips – at least in one particular area of automotive electronics.
Nissan relies on Hitachi Automotive for engine control units (ECUs). Hitachi Automotive relies on an unnamed overseas supplier for ASICS to go in its ECUs, probably automotive-grade microcontrollers with embedded flash memory. And that ASIC supplier may be a direct manufacturer or may rely on an automotive qualified foundry to which it has outsourced some of its manufacturing requirements.
So why doesn’t Nissan increase orders from its second ECU supplier or why doesn't Hitachi Automotive increase the numbers of chips coming from its second-source ASIC supplier? Oh, that's right! The automotive industry largely dropped second-sourcing during the last couple of decades because suppliers never let them down and it is expensive to qualify multiple suppliers.
Well now it is going to be expensive to not have qualified appropriate second sources.
The tight coupling of the modern electronics supply chain reminds me of an English nursery rhyme: "For the want of a nail the shoe was lost, for the want of a shoe the horse was lost." That tale goes all the way up to the kingdom being lost, something which I do not expect to happen in the case of Nissan and Japan - but you get the picture.
To bring the comparison into the 19th century has somebody in the supply chain been looking upstream and asking, Oliver Twist-like, "Please can I have some more?" only to be told: "More! More! You will be getting less. It's allocation time."
When asked if STMicrolectronics was the IC supplier in question and therefore responsible for the imminent three-day shutdown at Nissan in Japan, ST emailed this response.
"It is not ST’s policy to comment on customers’ statements. We can only state that it is a well-known fact that the recovery of the automotive business following the crisis is taking place at a faster rate than expected and that the whole automotive electronics supply chain is currently under pressure to keep up with market demand. The most recently disclosed data for ST shows year-over-year growth for automotive devices of 61 percent and the company is strongly engaged to keep the commitments it has made to its customers."