In Toulouse, Continental Automotive is looking for alternatives in the face of the semiconductor shortage
For more than a year, Continental’s Toulouse plant has been living in the eye of the storm in the face of the global shortage of semiconductors. This site of 1,450 employees hosting both the head office of Continental Automotive France, a subsidiary of the German holding company, and the group’s sole production site in France for automotive electronic equipment. They manufacture tire pressure systems, electronic control units for controlling the various electronic accessories in the body of a vehicle or even automotive solutions integrated into smartphones.
Production lines disrupted by global shortage
Semiconductors – which control the flow of current in electronics – are therefore central to the manufacture of many technological nodes essential to a car. They are made from strategic metals, like silicon and germanium, as well as other pure elements.
While tensions could appear in the coming years on the supply of strategic metals necessary for these chips, driven by the explosion in demand linked to the ecological transition of many industries, the current shortage is not justified by the lack of gross resources. It is the manufacturing capacity of this intermediate product that is in question. Europe and the United States have preferred in recent decades to turn away from the design of these circuits. As a result, production is now ultra-concentrated in Asia.
The post-Covid economic recovery, which has generated a boom in demand for semiconductors, has highlighted Europe’s supply weaknesses. It is difficult for production units organized on the other side of the world to meet demand in such a short time, as the manufacture of these chips is complex and time-consuming. From Renault to Stellantis, up to automotive equipment such as the Continental Automotive plant, many players have seen their production lines disrupted, or even stopped, for lack of these precious electronic components.
“Supply tensions started in summer 2020, remember Jean-Philippe Sola, head of production purchasing at Continental Automotive France. When they came out of confinement, consumers wanted to have fun and vehicle sales restarted very strongly. The recovery in activity was very sustained and much better than expected. We started to really run out of components from the third and especially the fourthmth quarter 2020“.
From the first difficulties, Continental met in place daily with a multidisciplinary team made up of the members of the executive committee of the company, the executives of the purchasing and sales departments. The production activity in Toulouse had to be completely reviewed in the light of component routing difficulties.
“The production was never completely stopped, but it was disorganized. We were and still are in a situation where we have the personnel but not the components. It took a lot of flexibility to to adapt according to the deliveries of semiconductors which reached us “, detail Jean-Philippe Sola.
Continental Automotive confirms having had recourse to short-time working in recent months without specifying the extent.
The parent company was not clarified when it released its third quarter results. The Continental group has reduced its annual revenue outlook to between 32.5 billion and 33.5 billion euros, against a previous target of 33.5 to 34.5 billion euros.
No quick fix
However, the equipment manufacturer is multiplying the avenues to overcome shortages, without there being a miracle solution.
“We can find alternatives. It can be technical solutions that are offered to us by the supplier with a component that has at least equivalent functionality to the one that is in short supply. But this is not always possible. For example, microcontrollers are complex components that are not interchangeable because of their imprint on the printed circuit. From one supplier to another, this modification of imprint. On the other hand, microcontrollers are associated with very specific software. Changing our source of supply would require new software developments “, advance the Toulouse manager.
Likewise, Continental has rarely resorted to redesigning its equipment to accommodate a new supplier. Such an option requires relaunching in a very long qualification process.
Occasionally, Continental Automotive called on brokers, in other words component resellers.
“This is not a miracle solution because iThere are very few components available on the market given the global shortage and these distributors can offer components at exorbitant prices, up to 50 times the usual price. There is also the issue of quality. Our quality department ensures the traceability of the component to verify that it is indeed parts from one of our manufacturers. In the past, we have come across counterfeit components: the case was empty or we did not have the expected technical functionality “, indicates Jean-Philippe Sola.
Smooth production over the long term
Continental is now preparing for a crisis that is set to last. “We thought that the last quarter of this year was going to be the least tested. In reality, it is not at all the case. We continue to face very great difficulties of supply and to operate in degraded mode as since the beginning. of the yeare “, he continues.
Faced with the looming long-term difficulties, the German group has launched a strategic plan to smooth the delivery of components.
“We have been struggling for months to ensure that suppliers are providing additional capacity in place to meet our demands. But for suppliers, investing in new ones. éco equipmentûyou more and more expensive: uA semiconductor production line is several billion euros, an entire semiconductor factory represents several tens of billions of euros. Now we are committing to long-term component purchase volumes only a month or two ago, ”the manager notes.
Continental is currently finalizing its component purchases for the year 2020. Pick negotiations began in April. But making such commitments requires having precise visibility of production in its factories.
To achieve this, the company is also increasing its exchanges with car manufacturers in order to have a more refined view of the production rates that will be required in the medium term. It is also based on market analyzes, provided by certain firms such as McKinsey.
Finally, the subsidiary has internally developed predictive tools on artificial intelligence to anticipate its production over the coming months and years.
Car if today the automobile does not consume 10% of the global component market, the sector’s needs will double by 2030 with the boom in new assistive technologies a driving and electric cars.