So to set the scene, when you ordered your new shiny car you knew you may have to wait a while but for some reason its taking much longer then you first anticipated. This isn’t the fault of BMW or Mercedes or whatever company you’ve chosen for your mid-range saloon, coupe or 4×4. The issue runs much deeper. All those fancy “gadgets and gizmos” as my parents might say need microchips and semiconductors to work, and there lies the issue. A shortage of semiconductor chips, the brains of our electronics, has plagued economies for over a year and currently there is no end in sight.
Just how bad can a shortage of computer chips possibly be?
Pendragon a leading UK auto retailer recently stated in a trading update that “vehicle order waiting times are already being extended” and this sentiment has been echoed by car dealerships, Evans Halshaw and Stratstone, who warned that the supply of cars was likely to be restricted during the second half of 2021.
As demand for chips continues to exceed supply, the auto industry is forecast to be the biggest loser in 2021, with up to £14bn wiped off global carmakers’ operating profits this year, according to Goldman Sachs estimates. Semiconductor manufacturers temporarily shut down their operations as the coronavirus first took hold in early 2020, and their customers cut or cancelled orders, anticipating weaker consumer demand.
However, the opposite happened, and shoppers rushed to buy computers and other electronic devices to keep themselves entertained during successive lockdowns. Fear of Covid-19 has also fuelled car sales, as people avoided public transport.
Well restrictions have ended now so why have the factories not returned to normal output?
Even though production has been returning to normal, shortages persist, which continues to influence manufacturing. Analysts are warning that the global economy has entered a peak shortage for chips, with tightness in supply expected to ease slightly in the third and fourth quarters of the year. However, global stock of semiconductors is not forecast to return to pre-pandemic levels until 2022 which will leave car manufacturers struggling to sustain the pent-up demand.
We are now in a world where every industry is either enabled by, or dependent upon semiconductors.