Automotive Chip Shortage Update

What was car-buying like for you last year? You checked out the websites of your favorite manufacturers, watched YouTube reviews, and read the automotive mags to narrow your vehicle choices to one ideal. Then you went to a dealership or online when it came time to buy; you discovered that the model you wanted was unavailable but might appear in a few months. 

What happened?

The worldwide chip shortage has left dealer lots empty and forced losses of over $200 billion for the automotive industry. The problem grew from a perfect storm of trade tensions, labor shortages, and the absence of raw materials, with COVID-19 shutdowns adding to the dilemma. In short, supply could not meet demand.

It takes about 14 weeks to assemble a microchip, with much of that time spent waiting for the crystals to grow as depending on size, quality, and specification, it can take one week to one month. Once the crystals or ingots are ready, they are installed on the silicon wafers for the chips. There is no rushing in the chip process.

The ending of the pandemic also boosted demand as consumers started voraciously buying more electronic products. The semiconductors have always been a critical component of 5G technology, which is exploding in use.

What are the solutions to the chip shortage?

In the past year, companies have been hard at work looking for solutions to the problem. Some have rewritten software so that a single chip can do more work than previously. Others have found ways to expedite the shipping, such as by landing helicopters in a parking lot to make deliveries quickly.

Some auto manufacturers have eliminated certain features.

• The number of USB ports may have gone down or augmented reality removed from cameras.
• GM has temporarily eliminated the Stop-Start feature, which shuts engines off at stops and restarts them again when you want to move. 

How is chip production catching up?

Many manufacturers are focusing on building less-expensive chips with less power because these are the ones car makers need. The most advanced versions are needed only for the latest smartphones and computers. 

Companies in the US, Taiwan, Germany, and the rest of the world are building new plants and increasing research into chip development programs.The US Congress recently passed a bill that gives over $52 billion to US chip makers and tax credits to investors in semiconductor manufacturing. The European Commission established a similar fund with over $45 billion.

Recovery

The automotive industry is slowly gaining ground, but you can’t expect the crisis to end soon. Curiously, a piece helping is the decreased consumer demand. US consumers previously purchased 17 million cars a year before the pandemic. The Kelley Blue Book predicts that Americans will buy about 14.4 million vehicles this year.

While automakers have increased production, they want to avoid making too many cars. Some, such as Ford, have considered a business model where consumers order vehicles before one is built. For many manufacturers, unlike Ford, vehicles are in production and rolling out daily.

The dealer lots are again flowing with the latest models, making it more likely that you’ll drive away with the one you want. See one of your favorite dealers at the Beach Boulevard of Cars today, and wait no more for the vehicle you want and need.