Breaking news in recent months has been revolving around a semiconductor shortage. As a car person, this is really big news. You might not realize it, but this directly impacts car manufacturers across the globe. Let’s talk about what this means and what’s going on.
What’s Causing the Semiconductor Shortage?
This shortage is brought on by one thing, but it appears in two ways. It’s due to COVID-19, at the end of the day.
For one, more people are working and schooling from home. That means more reliance on electronics like TVs, monitors, computers, and laptops. If you didn’t know, you can find semiconductors in every one of these products.
Secondly, there is a slowdown in chip production thanks to COVID. Some factories were forced to close their doors, implement new procedures that subsequently slowed down manufacturing, and had people home sick from COVID.
A lot of production was done overseas in China and Taiwan, two areas heavily hit by this pandemic. These two factors combine to make a sizable shortage in semiconductors.
The Semiconductor Shortage’s Effect on Car Manufacturing
The auto industry is currently estimated to lose $61 billion all thanks to a semiconductor shortage. That’s everyone from suppliers to dealers and manufacturers – the whole supply chain is getting shaken. It might work out to something like 10% of total demand at the end of the day, and that’s just a conservative guess.
Honda and Nissan are preparing to make a quarter of a million fewer cars this production year. Ford expects to take a 2.5 billion dollar cut to their profits this year, and GM predicts around 2 billion for themselves.
Semiconductor Use in a Car
Your car has a ton of semiconductors that are used all over it. They’re in simple systems like your brakes and steering, and they’re also found in all the electronics. This means your infotainment system, digital dash, and ECU.
It’s impossible to build a car in today’s age without using semiconductors. This is where the problem arises. If there aren’t enough chips to start building, then car manufacturers are forced to sit around and wait. There’s no way around it. Almost like trying to build a car with a tire shortage.
With that said, no car manufacturers are immune to this new shortage. Any CEO that you talk to will have the exact same response – they’re going to lose money and there’s nothing they can do about it. A shortage of this size is outside of a car manufacturer’s hands, so we have to turn to higher powers: the government.
What is the White House Doing About it?
On February 24th, President Biden signed an executive order. The purpose of it is to address this chip shortage and find a remedy. Industry leaders are banding together to fix the problem and ramp up production in the coming months.
The executive order itself is aimed to research why there’s a shortage. From there, different leaders will address the problems and correct them. It asks the Departments of Commerce, Defense, Health, and Energy to put together a 100-day review on the supply chain of semiconductors.
This doesn’t immediately solve the problem, but it’s a necessary first step.
Unfortunately, there’s not a lot of good news at this time. A chip shortage is really hurting the car industry and there’s no telling what the full impact will be. We’ll have to stay tuned in the coming months and see what can be done to save our cars. In the meantime, cherish your car and give it a little TLC.