Due to the shortage of semiconductors, losses to automotive manufacturers will exceed $210 billion in 2021 alone. In 2022, the situation will worsen even more.
For the second consecutive year, the auto industry has been unable to get out of the trap it has lured itself into. When factories are shut down, there are not many tools to minimize costs. After the pandemic and lockdowns dropped sales in early 2020 like winter crops, purchasing departments rushed to cancel orders for components. Including semiconductor chips used in all kinds of control units—from keyless entry to autopilots. The manufacturers of computers, smartphones, game consoles, and other gadgets immediately took advantage of this. And the demand for these devices, due to home imprisonment, soared inversely proportional to the demand for personal transport.
A different but parallel story is the growth of bitcoin and other virtual currencies rates, and hence the demand for video cards for crypto farms. And when in September-October the auto industry was surprised to find that demand was recovering faster than it was falling, it turned out that there was nowhere to order semiconductors. All quotas for purchasing silicon wafers and for printing microcircuits had been depleted, and production was scheduled for 10—12 months in advance.
What companies have incur losses on semiconductor shortage
But corporations faced a real shortage this year, when production had to be stopped due to a shortage of the smallest parts. According to the Automobile Federation of Ukraine (FAU), due to the forced "standby mode", Ford reduced production by 700,000 cars, Stellantis (PSA+Fiat)—by 600,000, and Renault Group—415,000. Even in the most developed European markets, new car sales fell by 20—30%. In total, according to the estimates of the consulting company AlixPartners, this year alone, car production will decrease by 7.7 million, that is, the concerns will earn less than $210 billion in profit. Analysts at IHS Markit estimate the current decline in production at 5 million vehicles, but next year it will reach 8.4 million vehicles.
But the shortage hit everyone hard, because today microprocessors are used everywhere—from electronic toothbrushes to tankers. Even the very insatiable consumer electronics manufacturers have felt it. The market was feverish not only from the pandemic. Here are large fires at two Japanese semiconductor factories as well—a consequence of attempts to speed up production. And an abnormally cold winter in Texas, where the main production facilities of American chipmakers are concentrated. And the "dewatering" of Taiwan that is the world leader in the production of semiconductors—because of the unprecedented drought, there was simply nothing to cool the machine-tool fleet with. The protracted US-China "trade war" also played an important role—the United States limited the access of Chinese companies to Western technologies.
Usually microcircuit designers (fabless companies like AMD, Apple, Nvidia, Qualcomm, etc.) outsource production to third-party "foundries", most often located in Southeast Asia, where labor costs are still low. Have you ever heard of the Taiwanese brand TSMC? By the way, this is not just a world leader in the production of complex microcircuits—it controls more than 50% of the market. That is, it prints more microchips than its closest competitors (Samsung, Intel, and Micron) together.
Of course, all suppliers are trying to simultaneously increase lead times, increase prices and ramp up production. According to analysts from the International Data Corporation, by the end of the year, the income of chip makers will grow by 17.3%, after that the sector will stabilize and by next summer it will come out of the crisis. And closer to the second half of 2023, there may be an oversupply in the market due to the current feverish growth of production opportunities.
Situation in Ukraine
In our market, the crisis related to the shortage of semiconductors was felt much weaker for a long time than in the EU. Most of the importers managed to meet the demand due to the stocks accumulated during the quarantine. But now the picture as a whole is correlated with the European one. The queues for the most popular configurations are growing, as are the prices. The experience of neighboring countries shows that in the situation of increased demand, greedy dealers will "load cars additionally" with all kinds of accessories, increasing the selling price by 20—30%. And buyers will have to pay for rubber mats at the price of parktronics, because there are more people who want to buy a new car with plastic plugs in place of multimedia than cars themselves. And this situation will last at least until the summer.