“Chipageddon” with semiconductors in short supply – WSJ – bullish on edge cloud computing / infrastructure as foundation for nascent automobile digital transformation

On 01/10/2021 (today), WSJ put out a very interesting article –

Ford, Other Auto Makers Cut Output, Idle Workers on Chip Shortage- sector starts 2021 by idling plants, faces a ‘chipageddon’ with semiconductors in short supply

Many car manufacturers are having to pause production because they are in shortage of chips for their vehicles, and in the article, they mention Ford, Honda, Toyota, etc. the kind of car brands that you generally wouldn’t associate with innovation and thus having their production constrained due to chip shortage.

 Toyota facility in San Antonio. The company now plans on making roughly 40% fewer of its full-size Tundra pickups here than forecast for the month of January. (credit: WSJ)

The use of chips in normal cars is exploding – per Guidehouse Insights (referenced in the article), there are at least 40 different chips in most of today’s cars and some high-end models have up to 150 chips! This inevitably led to a supply chain nightmare particularly given the supply shock from covid19.

Regardless, I am very surprised by the extent of digitalization of not just electric cars, but also cars that we wouldn’t normally associate with high tech, including pick-up trucks as noted above or popular cars like Civic or Accord from Honda (also mentioned in the article).

First order of thought would be that this is positive for semiconductor manufacturers for cars ($AVGO), but I think it might be more interesting to look at a bigger picture- that is what does widespread digitalization of cars mean?

I am focused on follow-through on demand / generation / consumption / analytics of data

This leads to my bullish view on edge cloud computing ($NET and $FSLY) – more and more, we are relying on data services that requires very low latency between data generation and response generation and can achieve those analytics in secured and reliable manner – a better internet.

Digital transformation is just the beginning and we still remain in the forefront of the inflection curve given that we are still busy installing devices that will generate and consume data.

What other sector do you think will benefit from this trend? Please comment below!

* not investment advice

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