Ford's semiconductor crisis
Ford’s semiconductor crisis was part of the global chip shortage from 2020 to 2022. But could things have turned out differently? Continue reading to find out more.
Key Nuggets:
- The Ford semiconductor crisis exposed the risks of lean supply chains.
- Misjudged demand, fragile chip supply, and poor visibility made Ford vulnerable.
- The company lost billions, halted F-150 production, and parked thousands of unfinished trucks.
- Ford responded with storage lots, supplier partnerships, and long-term sourcing reforms.
- African supply chains can adapt these lessons to build resilience in critical sectors.
Background Story Behind the Ford’s Semiconductor Crisis
When the pandemic started in 2020, no one was sure of what to do. And to protect themselves, automakers, including Ford, canceled or reduced chip orders.
People weren’t focused on getting cars at the beginning of the pandemic. However, constraints on movement sparked their interest in consumer electronics, which experienced record demand during this period.
Naturally, chipmakers shifted their output to serve tech giants, which meant automakers were almost forgotten at the back of the queue. When demand for automobiles picked up, companies like Ford, Volkswagen, and others, which had no reserves, were stranded.
Ford’s challenge was compounded when a winter storm in Texas shut down fabs and a fire at Japan’s Renesas factory halted production for months. These events coincided with the auto industry’s efforts to ramp up output.
However, Ford’s reliance on just-in-time inventory meant it had no buffer to absorb the shock.
Unlike consumer electronics, cars depend on older, low-margin chips. But these are harder to scale quickly. And chipmakers had no spare capacity. Furthermore, foundries prioritized their larger customers in consumer electronics.
For example, the auto industry only represents about 3% of TSMC’s business, while smartphones were as high as 48%. It was a no-brainer for the chipmaker to prioritize a larger clientele.
This structural disadvantage left Ford particularly vulnerable when chips grew scarce. As Ford’s Chairman, Bill Ford said, “Had that pandemic not manifest itself, we would’ve most assuredly not been in the predicament we’re in.”
Read More: Lessons From Coca-Cola’s CO₂ Supply Hitch in 2018.
The Impact Of Ford’s Semiconductor Crisis
The crisis hit Ford hard. In 2021, the company estimated that it had missed out on sales of about 1.1 million vehicles. In Q2 of 2021 alone, Ford lost about half its planned output. Financially, the shortage wiped out $2.5–3 billion in profit.
But the most visible effect was unfinished vehicles. In 2021, thousands of Ford F-150s and Super Duty trucks sat idle in Kentucky and other sites. In 2022, Ford revealed that another 40,000–45,000 vehicles were waiting for chips.
Customers were inundated with delays that lasted for months at a time. And dealers were stuck with empty lots. Ford’s stock price dropped by double digits after the company warned of higher costs and unfinished inventory.
The crisis showed how a missing $1 chip could hold back vehicles worth tens of thousands of dollars.
Read More: How Tesla Navigated The Model 3’s Production Bottleneck in 2017 & 2018.
How Ford’s Supply Chain Approached The Semi Conductor Crisis
Ford had no choice but to take drastic steps to cope. For starters, the company shut down production at plants, including those building its flagship F-150.
However, rather than completely halting car assembly, Ford built vehicles without chips, parked them in huge storage lots, and waited for the chip supplies to arrive. The Kentucky Speedway was filled with rows of unfinished Ford trucks waiting for semiconductors.
To maximize the limited chips it could secure, Ford prioritized high-margin vehicles such as pickups and SUVs. Engineers also had to redesign some of the parts to accept alternative chips, while some non-essential features were removed.
By late 2021, Ford signed a collaboration with GlobalFoundries to secure future chip supplies and even co-develop custom designs.
CEO Jim Farley admitted the company had mishandled its chip sourcing, saying Ford would have to “handle our supply chain differently for these key electronic components.”
Read More: Supply Chain Lessons From GM’s 40 Day Labor Strike in 2019.
Lessons From Ford’s Semiconductor Crisis
Ford’s supply chain relied too heavily on just-in-time delivery without creating the necessary buffers that Toyota and Hyundai had implemented. The result was devastating, but there are valuable lessons here:
1. Diversify and Build Visibility
Ford’s troubles underline the potential risks of relying on a single source or supplier, as well as limited visibility. Meanwhile, Toyota performed better during the same period because it stockpiled chips and had close ties with sub-tier suppliers.
Every supply chain must map its weak points and avoid blind spots.
2. Hold Buffer Inventory for Key Inputs
The just-in-time system is the holy grail of the auto industry, but a lean pipeline cannot handle shocks in components with long lead times. Semiconductors proved that some stock must be kept as insurance.
However, the lesson here is not to indiscriminately hold excess inventory but to keep reserves for high-risk and long lead SKUs.
3. Balance Cost with Resilience
Before the crisis, sourcing was heavily focused on pricing. But Ford’s experience showed that there is a need to balance low cost with reliable access. Going into direct partnerships with chipmakers, even at a higher cost, can prevent billion-dollar losses later.
Remember, one catastrophe is enough to erase years of savings.
4. Forecast and Adapt Faster
Automakers misjudged how quickly demand would return. The winners were those who adjusted designs and sourcing on the fly. For example, Tesla rewrote software to work with alternative chips.
Ford’s slower pivot cost time and money, which is proof that flexibility in design and procurement is not an option.
5. Treat Electronics as Strategic
Cars are no longer just mechanical products. They are digital machines on wheels. Ford’s Farley highlighted that electronic parts will soon represent more than half the cost of a vehicle.
This means that any auto supply chain must treat semiconductors with the same priority as engines or transmissions.
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How African Supply Chains Can Apply These Lessons
Following these lessons, African supply chains must do the following to avoid a similar situation to Ford’s semiconductor crisis:
1. Build Supplier Transparency
African industries often rely on long global supply chains. But more businesses would be better off mapping their suppliers down to raw materials. Whether it’s food processing or energy, knowing where vulnerabilities lie is the first step to preventing shocks.
2. Keep Strategic Inventory
African supply chains should identify which components or inputs pose too high a risk to implement lean operations and localize or streamline the supply process. For example, fertilizer for farming or spare parts for telecoms.
Maintaining a safety stock for these ensures production doesn’t stall during disruptions.
3. Form Regional Partnerships
Ford’s partnership with GlobalFoundries shows the value of working directly with producers. African firms can do the same by collaborating with regional suppliers or governments to strengthen local capacity.
Initiatives to encourage domestic production of inputs can reduce dependence on distant markets.
4. Invest in Forecasting and Agility
Better demand sensing and flexible production help avoid overreactions. African manufacturers can adopt simple tools to predict demand swings and design processes that allow substitutions when key items run short.
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Wrap Up
The Ford semiconductor crisis was a wake-up call. A lean supply chain built only for cost can collapse under stress. Ford’s unfinished trucks at Kentucky Speedway became a global symbol of supply chain fragility.
For African supply chains, the lesson is clear. Resilience must sit beside cost as a sourcing priority. Buffer stocks, partnerships, and better forecasting are not optional—they are survival tools.
The next disruption may not be chips, but the lesson remains: prepare today or pause production tomorrow.
Obinabo Tochukwu Tabansi is a supply chain digital writer (Content writer & Ghostwriter) helping professionals and business owners across Africa learn from real-world supply chain wins and setbacks and apply proven strategies to their own operations. He also crafts social content for logistics and supply chain companies, turning their solutions and insights into engaging posts that drive visibility and trust.
