Blockchain to help automakers tame tangled chip supplies

TOKYO — Ford Motor was once the model of a vertically integrated company, handling everything from growing timber to assembly finished vehicles in Michigan. Fast forward 100 years and the current auto industry is completely different — dependent on supply chains that sprawl across the planet and myriad industries. 

But as supply chains become more complex, so has their management. And the challenges are sure to increase as the number of semiconductors in automobiles skyrockets. To address this, automakers are joining with chipmakers looking to the innovative technology that gave birth to the bitcoin, blockchain.

The 100-company Mobility Open Blockchain Initiative, which includes the likes of Honda Motor and General Motors, and electronics industry association SEMI, which counts Intel among its 2,000 members, will within the next few years bring together supply chain management systems they each have under development. This will enable chips and other components to be tracked at every stage of the production and transportation process.

The technology will be leveraged to help automakers get a handle on cross-border supply chains that have grown too large and complex for a single company to fully grasp.

This is particularly true for chips and electronic components, production of which are split across multiple countries. The number of chips used in a single car has increasedas auto technology grows more advanced, with KPMG seeing the market for automotive semiconductors more than quadrupling from this year to $200 billion by 2040.

Counterfeit chips with falsified manufacturer names or quality assurances cost U.S. semiconductor companies $7.5 billion a year, by one estimate. Low-quality fakes have reportedly found their way into the inventories of companies that scrambled to stock up on semiconductors to minimize the impact of supply chain links being severed amid the coronavirus pandemic.

Blockchain technology uses so-called distributed ledgers, which record information across multiple computers. That makes it nearly impossible to unilaterally alter entries, minimizing the risk of forged information.

Under the envisioned system, products and semiconductor manufacturing gear would be labeled with a two-dimensional bar code. This would be scanned at each step of the process, showing where items were shipped and what equipment they were processed on. Companies could access the system to confirm that they received the right products.

And if a flaw cropped up that required a recall, automakers could more easily trace the path taken by the problematic parts. Currently, companies must track down this information on their own, meaning that getting to the root of the issue can be a time-consuming process.

The technology can also be used to record greenhouse gas emissions generated by the production of each part, enabling a more accurate picture of a vehicle’s overall carbon footprint.

And by making it easier to tell where components originated from, the blockchain system could help companies provide documentation for country-of-origin requirements in free trade agreements, and rework supply chains when necessary.

Blockchain technology is anticipated to expand into such fields as telecommunications and medicine. Such frameworks could reduce the risk of companies using transshipments, for example, to circumvent sanctions such as the U.S. government’s ban on doing business with companies that deal with Huawei Technologies and other Chinese enterprises.