A solution needs to be found. Fast.
Last week, Ford, Dodge, and Toyota were forced to idle some of their North American plants just a few months after the pandemic had forced them into the same action. Ford, for example, shut down its plant in Kentucky, home of the popular Expedition and Escape, and Lincoln Corsair and Navigator. The reason this is happening is due to a semiconductor shortage that's quickly spreading throughout the global automotive supply chain. But what's so special about semiconductors?
They are essential for things like infotainment systems, Bluetooth connections, and driver-assist systems. They're also used in smartphones, laptops, and gaming consoles. Many semiconductor factories were forced to shut down due to coronavirus restrictions, thus creating a global shortage. Also during that period, consumption of personal electronics dramatically increased as people were stuck at home and semiconductor demand suddenly outweighed supply.
Unfortunately for automakers, a majority of these semiconductors are manufactured in China, a country the outgoing Trump administration hit with tariffs and restrictions aimed at reducing technology transfers. The downside is that automakers are now left without a vital computer chip and they're begging the incoming Biden administration for help.
Bloomberg reports the American Automotive Policy Council (AAPC), a lobbying organization for Ford, GM, and the US operations of Stellantis (formerly FCA), is already applying pressure to the US Commerce Department to appeal to Asian semiconductor makers to reallocate chip production from consumer electronic devices to vehicles.
"We have requested that the US government help us find a solution to the problem because it will diminish our production and have a negative impact on the US economy until it's resolved," said Matt Blunt, president of the AAPC.
"We are not primarily concerned with where blame may lie for this global shortage, if it lies anywhere, but we just want a solution. And the solution is more automobile-sector semiconductors."
Chipmakers, however, are pointing out the auto industry is largely to blame for the current situation because automakers reduced orders when the pandemic struck last year. Meanwhile, automakers claim chipmakers favor electronic device manufacturers because of higher profit margins. In any case, the longer the dispute drags on, the more it'll hurt the US economy. Not only will fewer new vehicles roll off the production line leading to potential job losses, but they'll also be reduced sales because there won't be vehicles to sell.
Above all, a solution needs to be found quickly as chip manufacturers require at least three months - an entire business quarter - to increase production levels. Time is not on US automakers' side.