NCR Chip shortage

Global chip shortage leads to 3.9 million less vehicles

The global semiconductor-sparked crisis in the automotive sector is now expected to lead to a loss of about $110 billion in revenue, equating to 3.9 million vehicle registrations, according to global consulting firm AlixPartners. This projection is significantly worse than the prediction in January of $61 billion and 2.2 million vehicle impact.

“The pandemic-induced chip crisis has been intensified by events that are normally viewed as routine-like issues for the automotive industry, such as a fire at a major chip manufacturing plant or the drought in Taiwan,” said Dario Duse, managing director and EMEA co-leader for AlixPartners’ Automotive and Industrial practice. “However, this has now become a major obstacle for the sector, which is partially recovering from the collapse of business volumes in 2020 and managing the crisis will not only be crucial in the short term. The entire supply chain needs to build resilience in the longer term playing an active role in managing raw material supplies and logistics.”

Corrado Belicchi, director of the Automotive and Industrial practice, added: “As many as 1,400 chips can be found in modern vehicles, and this number will keep increasing as the industry continues its race towards an ever-increasing electric, connected and autonomous mobility model. However, the top priority for companies right now is to mitigate the short-term effects of this crisis using all possible levers, from contract renegotiation and production management to customer and investor expectations. What matters is to be proactive and have good information and analysis.”

This prediction underlines how fundamental is a deep revision of the entire production chain, no longer able to meet an ever-increasing demand. All this will grow exponentially as electric vehicles become increasingly popular. The reason lies in the number of components on board. For example, a hybrid vehicle requires up to 10 times more chips than a traditional ICE vehicle.

The current situation opened a window on a precarious scenario. The production of semiconductors lives in a constant state of emergency, as it is often affected by sudden surges in demand due to new devices being launched on the market or unpredictable trends. The Coronavirus played a major role in aggravating the current crisis forcing a number of production plants to close during the most acute phase of the pandemic. In addition, the recent fire at the Renesas Electronics factory, a major producer of semiconductors for the automotive industry, and a “trade war” between manufacturers have made things considerably worse.

Given the rapid deterioration from January to May, the sector cannot rule out the possibility of suffering even worse scenarios. In fact, several manufacturers have already announced a possible extension of the semiconductor crisis well into 2022.

This article is courtesy of Simonluca Pini, Contributor Editor, Autopromotec. Check out the website at: https://www.autopromotec.com.

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