The global semiconductor shortage has been deeply felt in the car industry, resulting in significant production reductions, breakdowns in supply chains, and financial losses. This scarcity, occasioned by a mixture of factors such as the COVID-19 pandemic, geopolitical strains, and natural calamities, has demonstrated that the sector relies on a brittle interlinked chain of semiconductor supplies.
Causes of Semiconductor Shortage
Several factors have contributed to the lack of semiconductors:
COVID-19 Pandemic: The pandemic disrupted global supply chains, causing shutdowns in factories and logistical challenges. The rapid increase in demand for consumer electronic products due to remote work arrangements and other digital lifestyles further strained the capacity of semiconductor manufacturing.
Geopolitical Tensions: Tensions between the US-China and Japan-Korea have also contributed to the shortage, as they have disrupted semiconductor production.
Natural Disasters: Events such as the 2021 Texas winter storm and earthquakes in Japan and Taiwan have caused significant disruptions to semiconductor manufacturing facilities.
Impact on the Automotive Industry
The semiconductor shortage has had a devastating impact on the automotive industry:
Production Cuts: In 2021, more than 11 million vehicles had to be removed from production due to the shortage, resulting in a 12% decline in global car sales compared to 2019. Automakers have been forced to cut popular features and reduce production volumes .
Supply Chain Disruptions: The shortage has led to long manufacturing lead times, skyrocketing from 3-4 months to 10-12 months. This has caused significant delays in vehicle deliveries and disrupted the industry’s just-in-time manufacturing model .
Fiscal Losses: Automakers have lost billions of dollars in revenue due to this shortage. The average cost of semiconductors per vehicle is expected to increase from $500 in 2020 to $1,400 by 2028, further straining the industry’s profitability .
Strategies for Resilience
To navigate the ongoing semiconductor shortage, the automotive industry is adopting several strategies:
- Strengthening Supplier Relationships: Automakers are forging stronger bonds with semiconductor suppliers to secure long-term supply agreements and ensure priority access to chips .
- Diversifying Supply Sources: Companies are exploring alternative sourcing options, including expanding production in regions like the US, to reduce reliance on a few key suppliers .
- Improving Demand Forecasting: Accurate short-term and long-term demand planning is crucial to align production with available semiconductor supply .
- Investing in Technology Roadmaps: Automakers are working closely with semiconductor suppliers to develop technology roadmaps that anticipate future chip requirements and enable better planning .
Outlook and Conclusion
While the semiconductor shortage is showing signs of improvement, with production capacity gradually increasing, the automotive industry is not out of the woods yet. Demand for increasingly complex automotive electronics, including those for electric vehicles and autonomous driving, will continue to drive up semiconductor usage. The industry must remain vigilant and proactive in addressing the ongoing challenges to ensure a more resilient and sustainable supply chain in the years to come.
