How Tesla/ Elon Musk is overcoming the global chip shortage

There is a global chip shortage and Tesla seems not to be affected.

The recent Q4 reports tesla released on vehicle production shows an increase of 87% and 5% more than the wall street journal projected one earlier in the year. So how is tesla managing to bypass the global chip shortage whereas other companies’ production dipped in the year 2021.

Here is how.

First Tesla does not make their own chips in-house as many people presume all they do is the design of their chips and a third party does the production. So why don’t they make their own as many people assume? Because having an in-house chipmaking department is not only impractical but also a very difficult, expensive, and time-consuming process.

Chips are made in Foundries that are slow and inefficient and require intense planning to build and a time period of up to 10 years and a huge cost of 10 to 20 billion dollars. In comparison, it takes tesla 1 to 3 years to plan build, and start manufacturing in a Giga factory. Another reason not to add a foundry in a Giga factory is the high vibrations and noise in car manufacture which isn’t a conducive environment to making a chip. Chips also require very clan environments cleaner than surgical rooms and considering all departments of tesla manufacturing they are not as conducive.

Almost all electronic devices made nowadays come with a chip, and with very few companies in the chip-making business competition is stiff for all available chips in the marketplace. And as the pandemic hit the globe in 2020 most car companies became worried, and canceled all their microchips orders. This basically shows how many car companies didn’t value the chip-making process and short-sighted business decisions. On the other hand, tesla didn’t cancel their orders but increased them and somehow got better prices and moved ahead of the pack. And when other others came back, they had to line up as more appetite for chips had grown due to increased devices requiring them.

That’s one of the few reasons why many vehicle companies are doing away with many features on their vehicles that don’t seem so necessary. Also, Tesla has been hit with the same problem but not as severe as the others.

Another reason is tesla is a technological business first before a car company and hence steps and years ahead of the competition. This gives them an edge in any decision-making involving technology. And before this shortage is addressed Tesla will still remain ahead of the pack.