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Chip shortage halts car factories and impedes the use of electric vehicles

What are the consequences of a microchip deficit for the auto industry. Photo: Shutterstock

What are the consequences of a microchip deficit for the auto industry. Photo: Shutterstock

The auto industry is increasingly losing in the battle for chips with manufacturers of consumer electronics, the demand for which has increased significantly due to the pandemic. The year is not over yet, and all auto giants have already reported on halting production. Even those visionaries who have thought of stocking up microcircuits.

As soon as it became clear that the factories would have to be closed due to the quarantines, automakers rushed to cancel orders for components in order to minimize costs. At the same time, Hyundai and Toyota ramped up purchasing cheaper chips.

What car factories are affected by the lack of semiconductors

In February, Ford halted car manufacturing at its German factories. In March, Nissan did the same in the US and Mexico, and Toyota—in the Czech Republic. In April, Hyundai halted the work of its main enterprise in South Korea, while Honda— in the United States, Canada, and Mexico. In May, it was the turn of General Motors plants in the United States and Canada. According to internal calculations, it will miss almost $2 billion in profit due to the shortage of chips this year.

Summer has generally turned for the automotive industry into a chronicle of frozen conveyors. At the moment, Toyota and Skoda factories are idle. And all of this is due to the tiny parts.

How the chip shortage occurred

If in 2019 and 2020. car factories halted production due to the coronavirus pandemic, quarantine measures, and lack of demand, then now—due to a lack of semiconductors. Moreover, the consequences of this shortage will be felt for at least another two to three years. The fact is that due to the boom in remote work and distance learning, the demand for information and communication equipment, devices and gadgets—computers, smartphones, "smart" TVs, game consoles, etc. has increased significantly. Their production, like 80% production of microcircuits, is concentrated in Asia—China, Malaysia, Taiwan, South Korea, and Japan.

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How much microcircuits for cars have gone up in price

Today, the global demand for microcircuits is on average one third higher than the current supply, and that causes the global rise in prices for consumer electronics. One of the components of growth was the rise in the cost of logistics and its complication. Lockdowns and trade wars between the United States and China and Japan and Korea have caused disruptions in global supply chains to increase by 60% to 70%. Experts from Susquehanna Financial Group have calculated that the waiting time for chips for large customers such as Samsung and Apple has increased—up to 17 weeks, for small ones—up to a year.

Therefore, any new disruption in an already tangled Asian supply chain can turn into paralysis in several industries at once. Anything could be the cause. For example, the recent local outbreak of Covid in Shanghai that is the largest logistics hub. Or the ecological crisis in Taiwan, where the world's largest chipmaker TSMC is idle due to drought.

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Who is to blame for the chip shortage

The auto makers themselves are partly to blame for the deficit that formed overly pessimistic forecasts with an eye on each other. Of course, the components ordered in the light of the recession are now in short supply. After all, for chip makers, car companies are much lower than electronics manufacturers in terms of priority. At least due to the volume of purchases. And no one is in a hurry to format the production calendar, even for the world leaders VW and Toyota.

According to Volkswagen estimates, due to a shortage of semiconductors, it was unable to produce about 100,000 cars on different continents last year.

So the concerns have to postpone the production of some models for the sake of others, come up with "bare" configurations with a minimum of controllers, or even supply dealers with dismantled cars, and then install the chips as part of the recall campaigns.

When the semiconductor shortage will come to an end

The saddest thing is that the shortage of microcircuits will only get worse. After all, cars are becoming more and more electronically dependent every day—recall modern full-width dashboards or autonomous driving systems that require scanning of everything and everyone.

According to the estimates of the Roland Berger consulting agency, today semiconductors that cost $3,000 are installed in a premium car. And in four years the total cost of chips used in a semi-autonomous electric vehicle will be more than $7,000.

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Even the low-budget subcompacts need dozens of controllers. Not to mention electric cars that Europe is in such a hurry to use—the number of semiconductors in them is already 50% higher than that of cars with internal combustion engines.

"The chip deficit will continue after 2022," said Pat Gelsinger, Intel CEO. "The chip industry will return to a healthy balance of supply and demand no earlier than 2023." But by that time, 5G networks will be fully deployed, and that means that consumers will need gadgets supporting the new standard. The one that will allow one to work remotely more comfortably and more productively. After all, most of the offices were closed as unnecessary.

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