Automakers Need Government Help More Than Ever

Industry News / Comments

There's no quick solution to the semiconductor chip crisis.

It wasn't too long ago when top automaker executives, including Ford CEO Jim Farley, predicted the semiconductor chip crisis would be resolved in the second half of this year. The reality is very different and potentially far more painful unless steps towards greater domestic production are immediately taken.

Automotive News spoke to some industry analysts about the current situation that began last year when chip suppliers sold their product to electronics manufacturers instead of automakers who were forced to stop production due to pandemic-related lockdowns. With demand greater than ever for trucks and SUVs like the Ford F-150 and Chevrolet Blazer, car companies can't complete vehicle assembly until those crucial chips arrive.

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"I have been in this industry for 31 years, and this is a situation I have never experienced before," said Peter Schiefer, president of the automotive division at Infineon Technologies, one of the largest semiconductor makers. "This will not be sorted out in the next few weeks."

The shortage will continue for the rest of the year and could result in a worldwide production loss of 2 to 3 million vehicles. North America alone could lose 719,000 vehicles in 2021. Even if the situation were to improve somehow this summer, it wouldn't last for long because chip makers have deals in place with electronics companies ahead of the holiday season. Black Friday in November is when everyone looks for bargains on electronic devices.

Basically, consumer electronic devices take priority over vehicles because automotive applications consist of just 10 percent of the total global semiconductor market.

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The Biden Administration is currently working with American automakers towards finding more near-term solutions, such as increasing domestic chip production. There are reports Intel could step in but it'd still take at least six months until manufacturing begins. Until that happens in the US and elsewhere, analysts suggest automakers could source chips from other components.

To help prevent the situation from happening again, carmakers should commit to earlier and larger purchase orders, and create chip surpluses, just like Toyota did following lessons learned from the 2011 earthquake. The bottom line is that automakers must rethink how they source their chips because they're not only competing against each other but also consumer electronics manufacturers.

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Source Credits: Automotive News

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