EV charging vs. chip supply

A2 Global’s CEO, Frank Cavallaro

A2 Global’s CEO, Frank Cavallaro, explores how the global race for electric vehicle charging infrastructure stacks up against chip supply

Most automotive semiconductors today rely on mature nodes—greater than 28nm. Some current charging infrastructure technology also requires mature nodes, creating a semiconductor supply and demand challenge across sectors.

Currently, supply can satisfy known demand. However, as charging infrastructure ramps up, it will prompt unforecasted demand for chips and could push this balance into a shortage environment. Although chips required for EVs may become more plentiful as consumer demand continues to soften, they will soon be consumed by future charging infrastructure.

In the face of market uncertainty, EV OEMs can prepare for unexpected supply chain disruptions, off-target projections and shortages for certain components by strengthening sourcing strategies.

On a global scale, EV sales have slowed because people can’t reliably charge them. Lack of charging infrastructure and capabilities have hindered widespread adoption. According to an ongoing study by JD Power, inoperable and poorly maintained public charging stations increasingly frustrate drivers. Rising energy prices, high production costs and uncertain battery supply have also contributed to the recent decline in EV demand.

On the component production side, a number of factors are limiting manufacturers’ ability to increase capacity. The first is profit potential. New fabrication plant investment is focused on growing more profitable markets like AI and hyper-scaler/cloud applications that require components smaller than 11nm. Companies are less willing to invest in the larger automotive sizes.

Secondly, design cycles for automobiles can be in excess of 60 months. In some cases, that is much longer than the life cycle of the chips going into the EVs, potentially causing a built-in EOL supply constraint.

We don’t know when demand might pick back up and when charging infrastructure may consume chips required by EVs. EV OEMs must prepare for uncertainty to mitigate risks when sourcing required components.

Here are three strategies that EV OEMs can employ to insulate themselves:

Build a supplier network:

Supply chains are more interconnected than ever before. When shortages hit, having a strong network of resilient suppliers gives EV manufacturers options. The network should include global and local suppliers to minimize the risk of disruption if an unexpected event occurs where most components are produced.

Be proactive: When supply chain disruptions happen, waiting to see how it affects your business can lead to significant losses. Opt for a proactive approach that identifies disruptions and adapts strategies immediately.

Leverage advanced analytics: Reliable, up-to-date sources for market forecast information help mitigate risk. Consulting with multiple players in the industry—partners, suppliers, customers and even competitors—helps OEMs develop a holistic, informed approach.

Staying ahead of the curve and developing sound sourcing strategies will help EV OEMs withstand supply and demand fluctuations until inventory can rebalance long-term.