By Jane Lanhee Lee, Joseph White and Stephen Nellis

OAKLAND, Calif/DETROIT (Reuters) -Common Motors Co and chipmaker GlobalFoundries Inc on Thursday introduced a long-term deal for the automaker to safe U.S.-made processors that may allow it to keep away from the factory-halting chip shortages that saved hundreds of thousands of automobiles from being manufactured in the course of the pandemic.

GlobalFoundries stated the settlement for a minimum of three years was the primary of its form and establishes a devoted capability solely for GM’s key chip suppliers at their upstate New York fabrication facility.

The announcement comes two days after President Joe Biden in his State of the Union tackle praised the passing of the $52 billion Chips and Science Act that goals to carry again chip manufacturing to the USA and factors to a brand new method by automakers to securing semiconductors.

It additionally highlights a brand new means that chip producers can finance U.S. growth, utilizing a mixture of funding from prospects that need devoted capability for semiconductors and funding from the federal authorities.

GlobalFoundries Chief Govt Tom Caulfield advised Reuters he believes supporting U.S. manufacturing makes the corporate aggressive when looking for a few of that funding.

“That is the automaker going proper to the manufacturing foundry, reserving the capability for his or her wants, making the suitable co-investments with that foundry in order that the most effective economics happen,” Caulfield stated.

Caulfield stated the GM capability can be put in in an present manufacturing facility upstate New York, however declined to offer specifics round how a lot of the manufacturing facility’s output can be devoted to the automaker.

GM advised Reuters that it’s working to streamline what number of distinctive sorts of chips are in its automobiles. However it’s securing capability for its suppliers to have the chips made as a result of the general variety of chips is predicted to rise.

“We see our semiconductor necessities greater than doubling over the subsequent a number of years as autos grow to be know-how platforms,” Doug Parks, GM head of worldwide product improvement, stated in a press release.

‘HAND-TO-HAND COMBAT’

GM rival Ford Motor (NYSE:) Co stated final week that its incapability to amass chips and different provide chain issues contributed to a $2 billion shortfall in fourth-quarter revenue in contrast with the corporate’s forecasts.

Ford Chief Monetary Officer John Lawler, who can be interim head of the automaker’s provide chain operations, advised analysts that securing enough provides of chips “continues to be hand-to-hand fight.”

Ford is placing “corrective actions in place,” Lawler stated. “We’ve obtained higher pipelines from brokers and spot buys. And we’re working very intently with our provide chain right down to the Tier 2 chip suppliers.”

In late 2021, in the course of the peak of the chip scarcity, GlobalFoundries and Ford introduced a non-binding settlement that would contain growing manufacturing capability for Ford.

Few particulars of the Ford association had been supplied on the time and few have been launched since.

Caulfield stated GlobalFoundries is speaking to virtually all the most important international automakers, and that the GM settlement doesn’t imply there won’t be extra offers with different producers.

By the tip of 2023, virtually 18 million autos can have been faraway from manufacturing plans for the reason that chip scarcity started, based on Auto Forecast Options.

The auto chip scarcity dramatically modified the best way carmakers cope with their chip suppliers, with whom they beforehand hardly ever had direct contact.

A number of auto corporations have now created groups and divisions to raised safe chip provide and take into consideration the design of digital platforms for automobiles going ahead.

Chip producers advised Reuters final yr, it was time for the auto business to hold among the burden of the funding for the multibillion-dollar amenities wanted for producing chips.