Update for 2024: What’s Going on with the Semiconductor Shortage? 

If you tried to buy a car a few years ago, the model you wanted might not have been available at any of the dealers from the Beach Boulevard of Cars in Huntington Beach, because of a semiconductor shortage. We briefly discussed it two years ago in the midst of the pandemic and lockdown if you don’t recall. A modern vehicle in Orange County can have from 50 semiconductors if it uses a conventional engine to as many as 3,000 chips on electric vehicles for controlling everything from windshield wipers and brakes to navigation and infotainment systems. Automakers use about 10 percent of chips available in the market.

Manufacturing and shipping shutdowns during COVID-19 disrupted semiconductor supply, making it more challenging for automakers to produce enough cars to meet a demand already reduced by the pandemic. When the pandemic started to end, consumer demand increased, not only for vehicles but also for smartphones, TVs, kitchen appliances, and many other devices that use semiconductors. Factories could not produce the number of chips needed to meet this demand.

Signing the Chips and Science Act

Because chips are critical to many national industries, such as defense and medicine, and those geared towards consumers, such as auto production and entertainment, President Biden signed the Chips and Science Act in 2022. This law granted a 25 percent tax credit for chip and semiconductor facilities in the US and over $52 billion in funding for new semiconductor initiatives. It also put Vietnam, a large chip manufacturer, into the mix by investing $2 million into that country’s training, development, manufacturing, testing, and packaging.

Not surprisingly, many companies took advantage of the funds, with many states adding the incentives required for federal access. For example, California has tax credits for workforce training programs, businesses that want to relocate or stay in the state, and qualified-related research expenses, such as wages, supplies, and contract costs.

The auto industry meets the challenges

Even before the Chips Act was signed, the auto industry met the challenges of the semiconductor shortage by scaling car production to the available supply of chips. Many advanced technologies advertised as part of specific models, such as hands-free driving, were removed from production with appropriate apologies from the manufacturer. Innovative technologies reduced the number of chips needed for certain processes, such as switching from traditional materials to less expensive gallium nitride, allowing electric cars to charge faster.

What’s happening now

Many auto authorities see the shortage of chip supplies disappearing by the end of 2024, with normal production and capacity continuing for the next 3 to 5 years. Companies are partnering with trade schools and other educational facilities to create training programs geared to semiconductors to meet an increase of 115,000 jobs predicted by 2030. This should help alleviate the shortage of skilled technical workers that could reduce semiconductor supply.

Inventory is now returning to pre-pandemic levels, which should encourage you to visit one of the dealers at the Beach Boulevard of Cars, and let the experienced folks there help to get you into the vehicle you want.