Crippling Chip Crisis May Be Over Sooner Than We Think

Technology / 8 Comments

And bizarrely, it has to do with a looming recession.

It seems the semiconductor chip crisis, which continues to cripple the automotive industry, may come to a swift and sudden end next year.

This is according to UK-based tech startup VNC Automotive, which believes the crisis will be upended due to a looming financial crisis. "It's ironic that the very situation that triggered the shortage for much of the automotive industry should be driving the recovery, now that it has become reversed due to the prospect of recession," said CEO Tom Blackie.

With an economic downturn fast becoming a reality, many consumers have taken to reducing their monthly spending. Many are hesitant to splurge on a new laptop or smartphone and, as demand falls, production capacity opens up across the supply chain. Automakers are taking advantage of this, says VNC Automotive.

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This is wonderful news for the industry as a whole, but it will certainly come as a blessed relief for automakers like Lucid and Rivian. The two EV startups have been battling production issues as a result of the chip shortage, with the latter's CEO even accusing chipmakers of playing favorites with more established brands.

If VNC Automotive's forecasting is correct, customers can expect to take delivery of vehicles like the Air Sapphire without potential delays. Importantly, automakers will no longer be required to remove features from cars, only to retrofit them at a later date.

Blackie notes the change has happened rather quickly. "Such has been the speed of the shift to oversupply that we are regularly approached by chip suppliers asking if we'd like to increase our orders."

VNC Automotive

The chip shortage caused a variety of problems for the automotive industry. Manufacturers were unable to keep up with demand, and consumers, desperate to get their hands on a new vehicle, were forced to pay through the nose as prices increased. What's more, greedy retailers took advantage of the situation, often placing exorbitant markups on the MSRP.

Hopefully, this comes to an end soon and pricing will stabilize. But, according to Blackie, it might not happen as soon as we'd like. "It may still take some time for this freer-flowing supply to trickle down to car-buying consumers, as manufacturers work to clear the backlog that's accumulated over the last couple of years."

Figures from Gartner show the automotive industry accounted for less than 9% ($38.7 billion) of semiconductor volumes in 2020. This is expected to rise to more than $116 billion by 2030 as electric vehicles gain traction, and increasingly sophisticated driver assists are fitted to vehicles.

VNC Automotive

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