Rivian Blasts Semiconductor Suppliers For Not Giving It Chips

Apr. 19, 2022 6:08 AM ET by Chase Bierenkoven Industry News / 6 Comments

RJ Scaringe says he can't get the semiconductors he needs because of the old guard.

Rivian has taken some hits of late. Most publicly, Rivian raised the prices of its models by 20%, drawing the ire of its customers almost instantly. Additionally, Rivian shares have fallen by a massive 60% just this year, down from a sky-high $179 a share after the electric truck brand's incredibly successful IPO. That huge drop was largely down to a huge production decrease in March this year, brought on when Rivian announced it had to halve its production forecast to just 25,000 units for 2022.

Rivian has struggled to meet demand because of the supply chain shortages we're all currently feeling the effects of. That was a large part of the production cut for models like the Rivian R1S discussed above. However, CEO RJ Scaringe says he can't get the chips he needs because of favoritism among semiconductor suppliers.

Speaking to Reuters, Scaringe says suppliers are hesitant to ship chips to him, instead allocating more semiconductors to more established brands than young Rivian. "I have to call up semiconductor supplier Y and say this is how many Supplier X gave us, and get everybody comfortable because the system's unproven. It's really frustrating," Scaringe said. The lack of chips for Rivian leads to a vicious cycle, wherein production is slashed, leading to lower stock prices and less revenue.

Dan Hearsch, managing director of automotive practice for consulting firm AlidPartners says "there is certainly an allocation" of chips. Hearsch backs up Scaringe's claims, stating that suppliers see young, unproven brands like Rivian and ask -"are you guys for real?"- instead sending vital semiconductor allocations to larger brands who are willing to pay for massive amounts of semiconductors upfront.

To us, it sounds a lot like getting a loan at the bank without any credit, say, to buy a Rivian R1T. Until you've got the credit to afford that electric truck, you're not getting that loan, just like Scaringe says he isn't getting chips. Rivian says the factory is able to meet demand until the parts run out. Scaringe states that his cars have around 2,000 parts, and "One half of one percent of those are challenged" by the shortages.

How long this semiconductor slog continues for Rivian remains to be seen. The obvious solution, at least to outside eyes, is for Rivian to prove themselves to suppliers by hitting production goals, but that can't be done without chips. It's all very cyclical, and we're going to have to sit tight and see if Rivian can make things work.