Transmission: Olaf, Texas, and chip factories have same problem — they’re ‘Frozen’


I don’t know about you, but this week has been mentally draining. Thankfully, Friday is finally here! Here’s what’s cookin’ today in Transmission:

  • The aftermath of winter storm Uri
  • E-fuel states its case as a carbon-friendly alternative
  • Industry news

The aftermath of winter storm Uri

Winter storm Uri was brutal for a lot of people, specifically in the Southeast and Southwest. I’ve passed countless vehicles stranded on the road, stuck in ice, snow and slush. Even the power grid in Texas failed due to the freezing temperatures. Thankfully, the storm is moving northeast to the folks who are better prepared for winter weather. With that being said, there are some repercussions from the storm worth noting.

Domestic semiconductor production halted. Two chip manufacturers, Samsung Electronics Co. (BXE: SMSN.L.EB) and NXP Semiconductors (NASDAQ: NXPI), have slowed production at plants in Austin, Texas. Samsung, which operates two facilities in the area, was asked by city officials to slow production until the power grid is restored. 

NXP, on the other hand, only scaled back production of its two facilities and shared in a statement that customers would be notified of “potential supply disruptions.” David Reed, VP of operations for NXP, said, “Once necessary utility services are restored, our operations team will be able to evaluate the impact of the shutdown and when full production will resume.” NXP’s Austin plants make up 30% of the total square factory footage. 

I’ve covered the semiconductor shortage a lot lately so I’ll leave it at this: What else could go wrong as the industry deals with this supply constraint? IHS Markit initially predicted that nearly 700,000 vehicles would be lost in production. While these facilities represent a minority of global chip output, that number could break projections.

No water? No power? Not open. Dealerships and dealer groups in Texas figured it was best to close down shop in the best interest of staff safety in response to the storm. Besides, I’m fairly positive that most people have elected to stay bundled up at home instead of cruisin’ the dealership lots in search of a good deal, so why stay open? Sonic Automotive Inc., the nation’s sixth-largest new-vehicle dealership group, elected to shut down all stores in the state. In an interview with Automotive News, Jeff Dyke, president of Sonic, stated that Texas wouldn’t return to normal until the weekend. 

Trucking capacity is tightening in the North.

(Chart: FreightWaves SONAR. Outbound tender rejects in Detroit (Blue); outbound tender volumes (Green); inbound tender volumes (Orange)) 

Tender rejections rose in the Midwest as the storm began. The increased risk of carriers getting caught in the hazardous conditions pushed spot rates up in some lanes by nearly 10%. The same story is now being told in the North as the storm dies out. The outbound tender reject index rose nearly 34% from Feb. 10 and rates will remain relatively high until the backlog of freight is addressed. Other markets close to Detroit, such as Toledo and Columbus, Ohio, are experiencing the same pattern. Freight brokers: Be ready, your customers will likely need to move freight to make up for delays caused by the winter storm.


E-fuel states its case as a carbon-friendly alternative

It’s easy to get caught up in the hype of EVs. I have to remind myself sometimes that, although exciting, EV adoption is a long-term story. But one alternative to gasoline that often gets forgotten about is e-fuel. Siemens Energy has been working with Porsche, as well as a few other automakers, to develop and (hopefully) implement a pilot project involving the incorporation of e-fuel.

E-fuel in a nutshell is used in the same way as traditional gasoline. The main difference is that the synthetic fuel is produced by using wind- and solar-powered energy on a large scale. Cars powered by e-fuel emit 90% less carbon dioxide, helping reduce carbon footprint without the need for an electric vehicle. 

The biggest barrier to EV adoption is inadequate infrastructure. Charging stations have to be built throughout complex city zones and in rural areas. Oliver Blume, CEO of Porsche, explained in an interview that the main advantages of synthetic fuel lie in its ease of application. “E-fuels can be used in combustion engines and plug-in hybrids and can make use of the existing network of filling stations,” Blume said.  

It’s too early to tell whether this will slow down EV adoption but I definitely think it could help. Installing new infrastructure will take time and heavy investment. According to Toyota President Akio Toyoda, the immense amount of carbon used by generating electricity is often a detail EV enthusiasts are unaware of. If the pilot project proves to be a success, it could play a big role in the transition to an electric future, giving governments time to implement infrastructure to support EV transition while offering a carbon-friendly solution.


Industry news:

  • Semiconductor shortage update: Reports starting circling that the White House was getting involved in the semiconductor crisis. As of Thursday, the White House had reached out to the Taiwanese government to help resolve the ongoing problem. I’m not sure if this will help since everyone now knows the longevity of the situation but I guess it’s better than nothing. If this shortage has done anything, it’s brought to light the heavy dependence on Taiwan’s chip manufacturing and the need for domestic chip production.
  • Production has been stopped due to the pandemic and the chip shortage, but now there’s another predicament arising. General Motors, Volkswagen and Audi are freezing production in Mexico temporarily due to the natural gas shortage. All three companies said that production will resume when gas returns to adequate levels. The natural gas shortage was caused by the winter storm and estimated correction isn’t expected until temperatures stabilize.
  • Kia Motors America suffered a network wide outage earlier this week. Kia dealers haven’t been able to order new cars or components for repair. Customers haven’t been able to use Kia’s UVO mobile app, which gives drivers the ability to preheat cars and get roadside assistance. Information-security and tech enthusiasts seem to believe that the automaker was attacked by ransom hardware. Hyundai Motor America, which shares parent company Hyundai Motor Group (LSE: HYUD.LN) with Kia, also suffered network issues, but with less severity.

Got any story ideas, critiques, or just want to say hey? My (virtual) door is always open. Shoot me an email at [email protected]

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