Shortage Of Semiconductor Chips

Semiconductor Chips are one of the most important components for any electronic item or automobile. During the lockdown, the employees had to do work from home and production, and the supply went low while demand kept increasing. Chip Shortage led to price hikes, and all companies suffered huge losses. Lockdown also forced people to use more electronic items.

Even after opening up the ports and factories, the pile of demands could not be fulfilled in such a short time. Setting up a chip manufacturing factory is a difficult and expensive task.

Global chip shortage

Even after opening up from this pandemic, the chip shortage is still a big issue. Brands like Samsung, Intel, etc., focus on planting new chip manufacturing factories, but it will take a couple of years to set up. 

Tech giants like Apple and Samsung have lost almost 20 percent of their production units during the pandemic. If a brand like that has to suffer from a chip shortage, then imagine the situation of small companies.

And because everyone is sitting at home and doing work from home, it causes a sudden demand for electronic products like tablets, phones, laptops, etc. So the chip manufacturing companies shifted their supply more towards the electronic items than the automobile industry.

Covid 19 caused a shortage of chips and increased the demand at the same time. It created a huge gap in supply that became very challenging for all the chip making companies. 

There are lots of Medical Machines that are being used in the hospitals. So supplying everywhere in this chaos is not possible. Even though the stored supply was not easy to transport because of traffic or crowded space at the ports. 

Companies suffered a huge loss so do the normal consumers as their works are dependent on that daily life gadgets. People had to pay more than the usual

Car chip shortage

Insufficient supplies of this critical input have been available for semiconductor chip consumers, mostly automobile and consumer electronics manufacturers. The time it takes to order and deliver a chip determines chip shortages. 

Bloomberg cites Susquehanna Financial Group analysis that the chip lead time has grown from roughly 12 weeks at the start of 2020 to 17 weeks in April. 

Carmakers relied on the electronics sector supply chain to feed their production lines on demand to ensure that manufacturing lines were always full. Input prices continuously dropped, and chip processing power continued to improve, contributing to this.

Chips in IC circuits double in number every two years. Over the past decade, chip usage has increased significantly due to the increased proportion of electronic components in car bills of materials. 

In comparison to two decades ago, electronic equipment and components are now about 40% of the cost of a new internal combustion engine car. A large portion of the increase can be associated with chips.

Impact on the Automobile Industry

This crisis has severely damaged the automobile sector. In the epidemic’s early days, most vehicle businesses feared an economic collapse, and some even broke long-term contracts. Eventually, the manufacturing of microchips was transformed to produce things for electronic goods. Automobile manufacturers are, therefore, in the lurch.

Passenger car sales fell 18.6% to 215,626 units despite increased local demand in November. For the third month in a row, sales have dropped by double digits, the Society of Indian Automobile Manufacturers reports. Sales of two-wheelers fell 34% last month, the lowest level in 11 years. Sales of three-wheelers fell to their lowest level in 19 years.

Some companies took action on the Car chip shortage

According to reports, several companies have temporarily removed features and high-end electronics capabilities to deal with the chip shortage, and they have also continued to delay vehicle delivery.

Thousands of Nissan vehicles will be devoid of navigation systems, and Renault will no longer supply a larger screen behind the steering wheel of its Arkana SUV.

Bloomberg reports that Amsterdam-based Stellantis has updated its Ram 1500 pickup truck by removing the standard rear-view mirror and replacing it with an upgrade.

Conclusion

Chip Shortage will last for a few more years as it will take time to complete the new chip fabrication factory. The Indian market has also got hit by the shortage, and in response, the Indian government has tried to set up the chip fabrication factories, but they could not pull it off due to a lack of planning and execution.

To cope with this situation, many automobile companies started to cut out the larger screens and high-end features, and some have delayed the vehicle’s delivery. However, a Chinese automotive industry group declares the worst of the global shortage of car chips is over.