How Elon Musk’s Software Focus Helped Tesla Navigate Chip Shortage – The Wall Street Journal

January 1, 2022 by No Comments

Tesla Inc.

TSLA -1.27%

has emerged as one of the auto industry’s biggest winners in a year plagued by semiconductor shortages and snarled global supply chains. It owes that success in some measure to its Silicon Valley roots.

Elon Musk’s electric-vehicle maker is poised to manufacture roughly 80% more vehicles this year than it did in 2020, analyst forecasts indicate, on pace for its fastest annual production growth since 2018. The global auto industry, hit hard by supply-chain disruptions, is expected to produce around 1% more vehicles than last year and 15% fewer than in 2019, according to IHS Markit.

Tesla has been able to keep production lines running in part by leaning on in-house software engineering expertise that has made it more adept than many rival auto makers at adjusting to a global shortfall of semiconductors, industry executives and consultants said. Chips are used in everything from controlling an electric motor to charging a phone.

Faced with shortages earlier this year, for example, Tesla was able to quickly rewrite the software necessary to integrate alternative chips into its vehicles, the company’s chief executive officer, Mr. Musk, has said.

In Tesla’s Model 3 sedan, a single group of semiconductors enables features such as speaker control and voice recognition, according to a study.


Zhang Peng/LightRocket/Getty Images

Semiconductor executives and consultants said Tesla, as a still relatively young car company, had the advantage of designing its vehicles from the ground-up, rather than adding parts in a piecemeal fashion over decades as many legacy auto makers have done. That allowed Tesla to consolidate systems, some of them said.

In Tesla’s Model 3 sedan, a single group of semiconductors enables features such as speaker control and voice and gesture recognition that in many other vehicles would be controlled separately using more chips, according to a Bain & Co. study based on a 2019 Model 3.

Ganesh Moorthy, chief executive officer of semiconductor supplier Microchip Technology Inc., said electric-vehicle-focused producers benefit from being more rooted in technology than traditional car makers.

This year, billionaire CEO Elon Musk reached several milestones across Tesla, SpaceX and Starlink. WSJ reporters Rebecca Elliott and Micah Maidenberg break down some of his biggest moments in 2021 and what’s to come in 2022. Illustration: Tom Grillo

“They are more plugged in, in many cases, and I think as a result also have been able to be more flexible in what they have built,” he said.

Tesla didn’t respond to a request for comment about its chip-sourcing strategy.

Traditional auto makers often have let parts suppliers handle sourcing chips. Mr. Musk’s preference for making vehicle components in-house meant that Tesla had greater supply-chain visibility in some areas, having forged close relationships with semiconductor companies before the crisis hit, some semiconductor executives and analysts said. Tesla, for example, designed the computer that enables its advanced driver-assistance technology in newer vehicles.

“Anything where they decided to make something by themselves, well then they had to have a direct relationship with the semiconductor supplier,” said Nakul Duggal, who leads the automotive business of

Qualcomm Inc.,

which designs chips and supplies Tesla.


What’s your outlook for Tesla in 2022? Join the conversation below.

The chip shortage traces back to late 2020, when demand for vehicles …….



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