A Silicon Chip Shortage Is Causing Big Issues for Automakers
Automotive companies have had to reduce emissions, temporarily suspend production, and even replace the idle and all firms.
You may have noticed that it is difficult to hold high-resolution graphics cards and game consoles these days. For the most part, this is due to the ongoing global shortage affecting semiconductor Foundries. As it turns out, the problem is most pronounced in the automotive industry. It is so bad that many OEMs, including Ford and General Motors, have had to travel to empty shelves and factories.
Ford had to stop production in Kentucky in December 2020, and in January ordered a month-long break from a German factory. Stellantis (a new company formed by a merger between Fiat Chrysler and Peugeot) has reduced emissions from factories in the US, Mexico, and Canada at the same time. As did Audi, which should have done nothing for 10,000 workers in Germany, CEO Markus Duesmann told the Financial Times that the problem involved “a very long series with varying degrees of short-term supply.” The Subaru Gunma factory in Japan is affected. Tundra production in Texas in Texas too, too.
This week, more hits keep coming. Mazda recently announced that it is likely to cut out 34,000 units this year due to a shortage of chips. The Mississippi Nissan truck industry has reduced its hours. And on Wednesday, GM said it would suspend production in factories in Kansas, Canada, Mexico, and South Korea. In many cases, car manufacturers try to put their best interests first, but as one of these closures shows, that doesn’t always happen.
Why Is This Happening?
As you might expect, the problem is rooted in the coronavirus epidemic. As countries around the world introduce new public health laws, car manufacturers are reducing emissions, and car dealerships and showrooms are closed to curb the spread of the disease. With sales stagnating, OEMs have reduced orders for semiconductor chips, many of which fit into every new vehicle to control almost everything. Similarly, chip manufacturers reduced their production of these chips in response to declining demand.
As Covid-19 restrictions have dropped in some areas, the search for new cars has returned, but car manufacturers have a problem. In the absence of car orders, foundries and fabs have changed their power to fulfill other orders instead. And despite its size, the automotive industry is a bit of touch when it comes to buying chips, accounting for about a dozen global semiconductor fab production. As a result, the bottle is expected to last for months.
Is Everyone Affected?
The problem does not affect the entire automotive industry equally. For example, Toyota claims to have separated its products from the goods it increased after the 2011 earthquake and tsunami in Japan. And Hyundai Motor Group did not cancel any of its chip orders by 2020 due to Covid-19, so it was not damaged. But hitting the industry is estimated at $ 61 billion. Don’t expect that the problem will just be prevented in the automotive industry, either. On Thursday morning, Qualcomm warned that “shortages in the semiconductor industry are overseas.”