How The Global Shortage In Semiconductor Chip Affects The Car Industry

Car Part World News

Feb 03rd, 2021

How The Global Shortage In Semiconductor Chip Affects The Car Industry

Like most other industries, the car industry has experienced severe setbacks due to the coronavirus outbreak in 2020. First, it was the near-eradication of the demand for vehicles, and now it's the global shortage in semiconductor chips. 

With vehicle sales rising faster than anticipated and manufacturers scrambling to make up for the lost time, the supply of semiconductors is shrinking fast. Without these chips, car manufacturers will be handicapped. 

Worst of all, the current semiconductor shortage does not only plague big tech companies like AMD and NVidia; it’s also slowing down car production big time. The rest of this post breaks down this issue in more detail.

Myth or Truth: Is There A Conductor Chip Shortage?

Over the years, the car industry has had to rely heavily on electronics to make cars more appealing. Added features like Wi-Fi connection, computerised engine controls, touchscreens, and GPS became possible due to the combined technologies of semiconductors and automobiles. 

Semiconductor chips are responsible for controlling car engines and powering their batteries. And those switches you use to wind up and down your car windows? They have semiconductors, too. These chips also help control entertainment gadgets in the car. Bottom line: semiconductors are very critical to the construction of modern electric vehicles, and their scarce supply can spell doom in the roll out of modern cars.

Because of the shutdown caused by the Covid '19 pandemic, automobile companies assumed there'd be a reduction in the demand for cars. They, therefore, reduced the number of semiconductor chips they ordered. What they did not expect was the skyrocketing demand for private vehicles, resulting from people’s qualms about taking public transports.

The lockdown also resulted in high demand for semiconductor chips for play stations, smartphones, and computers. Most people are staying at home, and they need these devices to cope with the boredom. This market segment significantly impacted the supply of semiconductor chips. In other words, the more people stayed at home, the more they needed to use the internet. The more they needed to use the internet, the more the demand for chips.

To meet this urgent demand, and considering that the auto sector was dormant for several months, semiconductor companies shifted their attention to fulfil the needs of the computer and entertainment sector. 

When the demand for vehicles has returned, it did with a vengeance. Unfortunately, manufacturers of automotive semiconductor chips could not meet the expanded demands. Europe's largest car parts suppliers, Continental and Bosch, have confirmed a cut down in chip supplies. With this, the biggest carmakers, including Volkswagen and Toyota, have no choice but to slow or stop production.

How Will This Shortage Affect Car Production? 

Vehicles are becoming smarter and more technologically advanced by the day. With most new cars incorporating entertainment and autonomous-driving elements, the amount of chips required is increasing. A premium car from a premium brand can need over 3,000 chips. Unless all these chips are available, the vehicle cannot roll off the production line.

Therefore, because of this semiconductor chip scarcity, different branches of many motor companies have had to shut down, or, at the very least, cut down the number of productions. 

Audi CEO Markus Duesmann has acknowledged that there would be 10,000 fewer cars produced within the first four months of 2021 due to the shortage in semiconductor chips. Toyota Motor in China has shut down its line of production, while Ford Motor has also idled one of their factories in Louisville, Kentucky. Meanwhile, FCA has temporarily halted production at some of their plants in Ontario and Mexico. 

Joining this mass shutdown is Honda, which has also shut down activities at their plant in Swindon, England, for a temporary period. Nissan has slashed production by 5,000, while Volkswagen has announced production adjustments in Europe, Asia, and North America.

Conclusion 

With more technological innovations in the car industry coming down the pipeline, this snag in the supply chain has indeed hit motor companies at the wrong time. The sadder news is that this shortage in semiconductor chips may continue for about 6 to 9 months because it takes up to 25 weeks for a newly ordered batch to be delivered to car manufacturers. 

The production of semiconductors requires high fixed costs. It also involves a lot of time and investment. Therefore, manufacturers cannot raise production as easily. Besides, new car models with more advanced tech are being introduced, increasing the demand some more and stretching supply further. 

So, is there a conductor chip shortage? Yes, there is. Fortunately, we can see the situation improving from the second quarter of 2021, especially as semiconductor companies have promised to expand their production in response to the demands.

On your level as a car owner, you may not be directly affected by this scarcity in supply. You will need other car parts, though, and that’s where Carpart.com.au can help you. By using the Request-a-Part function of our website, you skip the tedious process of searching for auto parts. What you do instead is fill out this form and start getting quotes from sellers registered in our network. It’s easy, and it’s free! Locate that part now!


By Damilare Olasinde