Long Bumpy Ride for the Auto Industry

Issue 68

The global chip shortage continues to hinder car manufacturers who are now being forced to shut down assembly lines as they do not have the chips required to continue production.

As the drought in Taiwan continues and the chip supply runs short, semiconductor manufacturers have been focusing on providing most of their supply to electronics such as smartphones and gaming consoles.  This has left automotive manufacturers out to dry as there are simply not enough chips to go around.  The demand in the auto industry is increasing as the Covid-19 pandemic comes to an end, however, manufacturers are quickly learning that they will be unable to meet the demand and are now taking on new strategies to continue to provide new cars to consumers.

Cars today can have over 3000 chips and manufacturers are now forced to cut corners on specific features in an attempt to continue to produce new cars.  Porsche has already stated that they will be manufacturing new cars but without high-end seats – which are equipped with these chips.  The French automaker Peugeot has decided to use older speedometers to make up for their lack of chips.  Other automotive companies are saving their chips and using them only for luxury cars rather than more affordable options.

The chip shortage for the automotive industry has shed a light on supply chain issues that have come about due to reliance on only a few suppliers, most notably TSMC in Taiwan.  In addition, Renesas Electronics had to shut down one of its factories due to an accidental fire within the factory.  Renesas Electronics, located in Japan, is another leading producer of automotive chips that are used to monitor brake functionality, power steering, and many other safety features.

To make matters worse, the ever-growing demand for electric cars is expected to only increase and with it, demand for semiconductors. Electric cars require significantly more chips than that of a combustion engine which is putting more pressure on automotive industries and their lack of chips.  With no end in sight for the chip shortage, electric car manufacturing is likely to be further limited as some automotive manufacturers may not survive long enough for the supply chain to get back on track.

Source: New York Times