The auto industry has shuttered due to shortages of vital semiconductors used in today’s high-tech automobiles. Manufacturers including;
- Tata in India
- Skoda in Czech Republic
have either completely shut down plants for certain makes and models or drastically decreased working hours for their thousands of employees.
Car makers are using more electronic components than ever before with electronic features like Bluetooth, driver assist, navigation, and hybrid electronic systems. An example of one of the largest players in automobile electronics industry is Netherlands based NXP Semiconductors. Not surprisingly NXP posted a revenue of $8.88 billion in 2019.
The shortages do not only affect the automaker, but many of their subcontractors as well as those who support them. Workers at these essential companies have all hoped to have the doom and gloom of 2020 behind them, but this year’s shortage will carry over reduced auto sales to 2021, even though demand is high.
Causes of Auto Chip Shortage?
COVID led to declining sales beginning in the 2nd quarter of 2020. Therefore, it led auto electronics suppliers to cut back production. Meanwhile automakers curtailed orders for electronic components used in production earlier last year. The booming home electronics sales in 2020 enabled component manufacturers to pivot their production from the slowing auto sales sector to laptops and other remote working technologies.
But when auto sales rebounded later in 2020 vehicle manufacturers resumed full scale production. Production increases quickly led to widespread component shortages in the US, Asia and Europe.
The sheer desperation of automakers is evidenced by a Reuters report that shares how leaders in Germany have asked leaders in Taiwan to persuade component manufacturers to assist in easing the shortages of auto chips. The request was made in a letter from German Economy Minister Peter Altmaier.
Experts say the recent chip shortages are “extreme” and are estimating that the lead times will not normalize until late spring at the earliest.
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Learn more from the Associated Press.