Semiconductor Shortage Constricts the Automotive Industry
Supply chain complexities combined with near-sighted planning has led to a semiconductor shortage that isn’t just impacting big-name tech companies but is now disrupting the semiconductor-reliant automotive industry
The effects of the pandemic continue to ripple into 2021, as automotive manufacturers are forced to halt production in response to what seems to be the early signs of a massive semiconductor shortage. While this semiconductor shortage is a distant result of the pandemic, it seems to have been more directly caused by complex and irregular demand, as well as poor planning.
Today’s vehicles house many complex electronic systems composed of advanced semiconductors, resulting in cars that contain around 50-150 chips each. Around a year ago, the pandemic caused a sharp decline in car demand, which in turn cause a sharp decline in semiconductor demand from the automotive industry. Semiconductor manufacturers responded by reassigning the capacity from the automotive industry towards other sectors such as consumer electronics, which remained in high demand throughout the pandemic. General Motors, Ford, Fiat Chrysler, Daimler, Volkswagen, Toyota, Nissan, and Honda are among the automotive manufacturers that have reported experiencing this semiconductor shortage.
How are automotive manufacturers handling the semiconductor shortage?
- General Motors announced that it is shutting down 3 of its plants for a week and slowing production at a fourth plant due to the semiconductor shortage.
- In January, Ford announced that it would close its plant in Saarlouis, Germany for a month. This German plant produces Ford’s most popular car in Europe, the Ford Focus, and also employs roughly 5000 people. Ford was also forced to close an SUV factory in Louisville, Kentucky.
- Daimler has announced that it will cut production of Mercedes cars in several plants throughout Germany and Hungary.
- Volkswagen announced that it will produce 100,000 fewer cars in the first quarter of 2021 at its factories in Europe.
- Honda and Nissan, Japan’s 2nd and 3rd largest carmakers, stated that they will be forced to cut production. The production of the best-selling Nissan Note will be affected by Nissan’s production cuts, and several models will be affected by Honda’s production cuts.
- Toyota was forced to reduce production of the Toyota Tundra, which is manufactured in Texas.
- FCA has delayed the restart of production at its Toluca, Mexico Factory, where the Jeep Compass is assembled. They have also paused production at their Brampton, Ontario factory where the Chrysler 300, Dodge Charger, and Dodge Challenger are produced.
As automakers adjust production and we begin to see how severe this semiconductor shortage is, analysts at Bloomberg estimate that carmakers will lose more than $14 billion in revenue over the first quarter of 2021 and $61 billion over the next year.
Mitigating Semiconductor Industry Volatility
As we are faced with semiconductor shortages, how can purchasers of semiconductors fortify their supply chain? Supplier diversification is a simple but critical measure to ensure a supply chain’s resilience through turbulent times. At Aegis Components, our global network of suppliers has been vetted and refined over the last decade. We also maintain strategically placed locations all around the world to help us locate and secure products globally and offer you the most competitive pricing and terms according to your delivery schedule. Even the most minor supply chain hiccup can produce a ripple effect of delays and withered profits.
Add Aegis Components to your approved vendor list, and let our team help you make strategic and well-informed purchasing decisions.
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