Is The Chip Shortage Over For Cars?

The COVID-19 pandemic resulted in a large disruption for the automotive industry as automakers struggled to get their hands on semiconductor chips. The small chips are found in electronic devices of all shapes and sizes from cars to gaming consoles. During the pandemic, automakers couldn’t get enough semiconductor chips to manufacture vehicles at pre-pandemic rates or most of 2021 and 2022. Things, though, are finally looking up as we’re past the halfway mark of the year, as a report from S&P Global Mobility claims that things are finally getting better for automakers.

During 2021, S&P Global Mobility estimates that approximately 9.5 million units of global light-vehicle production were lost because of a lack of available semiconductor chips. In 2022, another 3 million units were impacted because of the same issue. During the first half of 2023, the organization claims that only 524,000 units globally were affected because of a shortage of semiconductor chips. That’s a massive improvement that showcases how things are getting better. S&P Global Mobility attributes the smaller number of affected units to “more predictable availability” of semiconductor chips for automakers and their ability to adjust the production schedule of vehicles.

While things are getting better for automakers, the semiconductor chip struggles continue. Instead of the entire industry struggling to get semiconductor chips for cars, S&P Global Mobility claims that semiconductor chip issues are now episodic and tend to impact “a single component type or individual supplier.” This is different from the shortage during the pandemic, which impacted multiple component types.

“We’ve moved from obvious disruption, clearly visible at the automaker and plant level, to a stage where we know the constraint remains, but it is impossible to identify,” said Mark Fulthorpe, S&P Global Mobility executive director of global light-vehicle production. “We are now in a position where the auto industry has adapted to a constrained supply, and as a result it is much less likely to be hit by significant disruption.”

Is The Chip Shortage Over For Cars?

Semiconductor chip availability for automakers may be improving, but S&P Global isn’t ready to say that the chip shortage is officially over just yet. The organization claims that the move to more complex infotainment systems, more advanced safety features, and semi-autonomous systems has resulted in more semiconductor chips in cars. Data from S&P Global estimates that the average car from 2020 had $500 worth of semiconductor chips installed, while forecasts expect vehicles to come with $1,400 worth of chips by 2028.

The increased use of semiconductor chips in cars is unique to the industry, as the organization claims that other industries such as PCs and mobile phones have actually seen a decline in semiconductor chip requirements. There are differences in the types of semiconductor chips that automakers use in vehicles, too, that help explain why things are dramatically improving for the auto industry as they are for others.

S&P Global states that the semiconductor chip crisis is “largely resolved,” but there’s still a level of uncertainty for the automotive industry. For one, demand currently still exceeds supply. And the situation will only get worse as automakers choose to fit their vehicles with more semiconductor chips to run more advanced features. Additionally, the organization claims that the “structural lack of capacity for mature node capacity” hasn’t been addressed yet. On top of that, trade tensions between the US and China remained high, as the latter made a decision to restrict exports of key semiconductor materials earlier in July.

Still, overall, things are good. The semiconductor chip shortage is at a point where it’s not affecting vehicle production dramatically anymore. Consumers may find that a vehicle they’re looking to purchase is affected by a supply chain issue, but that seems to be isolated for specific models and brands. A future semiconductor chip shortage is likely since automakers continue to require more and more chips to manufacture high-tech vehicles, but increased chip production could reduce the severity of the shortage.

Source: S&P Global

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