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About two months ago, the company’s general managers Ford Engine and GlobalFoundries, a semiconductor supplier, spent several hours discussing the chip shortage that has plagued automakers and disrupted production worldwide.
On Thursday, the companies announced the outcome of that meeting – a collaboration aimed at increasing chip production in the United States and improving Ford’s supply of critical parts.
Ford said in a statement He said he and GlobalFoundries have signed a non-binding agreement to collaborate on chip development for Ford vehicles, and the companies will explore 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 while delivering the technologies and features our customers will value most in the future,” said Jim Farley, Ford’s CEO. “This deal is just the beginning and is an important part of our plan to vertically integrate key technologies and capabilities that will make Ford very different in the future.”
The companies plan to continue discussions about specific ways to increase chips production in the United States. They declined to detail or say whether Ford could invest in a new semiconductor factory with GlobalFoundries. The current memorandum of understanding does not call for cross-shareholding between companies.
Thomas Caulfield, CEO of GlobalFoundries, said the deal will encourage innovation and “provide the long-term balance of supply and demand”.
Ford and other automakers have had to intermittently idle their vehicle factories this year as they can’t get enough computer chips into the brains needed to control engines, transmissions, brakes, infotainment systems and more.
General Motors is also in talks with chip companies about ways to secure enough chips to keep their factories running. “We’re working on a strategy specifically to make sure we don’t see such restrictions in the medium term, and certainly not in the long term,” GM’s CEO, Mary T. Barra, said on a conference call last month.
The auto industry’s chip shortage stems from the onset of the pandemic, when auto factories were closed for nearly two months to prevent the spread of the coronavirus among workers. At the same time, sales of computer and game consoles increased, and their manufacturers increased orders for semiconductors. When automakers resumed production, chip suppliers had little capacity for them.
Ford was particularly hit earlier this year as a chip factory owned by one of its key suppliers was shut down by a fire. In the second quarter, it was able to produce only half as many vehicles as it had originally expected, although the chip supply has grown steadily since then.
GlobalFoundries was formed partly through the acquisition of facilities previously owned by chipmaker Advanced Micro Devices and IBM. It had its initial public offering stock in October and is investing heavily to increase its production.
According to a person familiar with the matter, Mr. Farley visited Mr. Caulfield at GlobalFoundries headquarters near Albany, NY in September to discuss how companies can collaborate.
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