I’ve talked a lot here about the supply chain problems going on right now—but that’s because of how wide-ranging their implications are. Nowhere is this more evident than the chip shortage, which I touched upon in my previous post. I recently came upon this article by the New York Times that dove into the shortage, and its relation to one of the 2010’s cultural icons- Tesla.
The global supply chain guarantees a level of interdependence that we haven’t really seen in recent times. Thus, when one or several parts of the chain are severely impacted, every company in the chain is affected. Such is the case with the chip shortage; automobile manufacturers are reeling from the lack of chips, resulting in less cars. Except for Tesla.
The article explains that Tesla, once ridiculed for making their own parts, had a major advantage over the other car companies in the pandemic because they could repurpose their own chips instead of waiting on other companies, allowing them to deliver cars faster. However, the article also states that Tesla was a smaller company than the other big-name manufacturers, and therefore could change its strategies faster and without many problems. Companies such as Mercedes are taking note of this, and are working on in-house tech development for their own cars.
Right now, this strategy makes sense. In the long run, though, it becomes less clear. I think that the supply chain has connected the world in ways that other economic systems have never before, and if a chip maker starts producing at prices that are much cheaper than automakers’ own chips, this strategy of semi-vertical integration would start making less and less sense. It all really depends on when the supply shortage ends, though, to see if in-house manufacturing would be a good strategy for the long term, and even that is not set in stone.