The COVID-19 pandemic and worldwide lockdown hit us hard, many manufacturing units, suffered losses across the globe, with the automotive industry and consumer electronics being no exception. From mobile phones to computers, automobiles and other electronic items that require semiconductors for control and memory functions are facing problems owing to the shortage of semiconductors.
Electric vehicle as well as traditional vehicle manufacturing requires semiconductors for advanced driver features and electronic entertainment systems that require sensors, integrated circuits, and power controllers. Car companies are not able to cope up with the situation and slowdowns in production are causing concerns.
Honda, Toyota, Ford, Subaru, General Motors, and Volkswagen are the hardest-hit automakers. Owing to a major drop in chip demand, General Motors announced that it will cut or reduce production at four plants in Kansas, Canada, Mexico, and South Korea. These production cuts will impact the Chevrolet Malibu, Cadillac XT4, Chevy Equinox, Chevy Trax, GMC Terrain SUVs, and the Buick Encore.
Germany-based Volkswagen in a statement said, "Due to the Covid-19 pandemic and the resulting decline in sales in the automotive industry, leading semiconductor manufacturers switched their production to other customer industries, such as consumer electronics. In the meantime, however, the car markets have recovered significantly, especially in China. This exacerbates the current situation and the industry and also the Volkswagen Group lacks appropriate electronic components."
As far as consumer electronics are concerned companies like Microsoft, Sony and Advanced Micro Devices are making major announcements to stop the production of some of their electronic goods owing to the shortage of semiconductors.
The increase in chip demand for automobiles and consumer electronic goods in the last few months has put pressure on the global supply chains leading to the shortage of semiconductors. According to semiconductor solutions provider Himax Technologies; laptops, monitors, mobile phones, tablets, and digital cameras could all faces shortages
What’s the reason for this supply-demand imbalance?
There is an ongoing blame game. In the initial weeks and months of the pandemic, semiconductor makers faced factory shutdowns and business restrictions as their customers were closing showrooms and factories. So, there was clearly a major drop in chip demand. While the consumer electronics market and automobile manufacturers geared up and started production, the demand increased but the semiconductor companies were facing chip crunch for obvious reasons.
Also, pandemic accelerated semiconductor demand from consumer electronics producers, because of increased use of laptops and consoles for home working, education and entertainment. Chipmakers blame automakers for keeping their inventories low and not preparing enough in advance. Automakers think chipmakers are favoring their consumer electronics clientele.
This chip crunch is definitely not going to be addressed overnight. Bloomberg has reported that most companies are already running at full capacity. Building a new one would cost billions of dollars. For now, the question is about how long it will take for the imbalance to right itself, and which companies will suffer most in the meantime. This question as to when will there be a balance in the demand-supply of semiconductors remains unanswered!