Chip shortage has a big effect on auto industry: what will car companies do?


Auto makers around the world are getting a rude awakening related to their new use of advanced technology to build their products.

Specifically, car makers are running up against a semiconductor chip shortage, as chipmakers experience difficulties meeting demand, and make the choices that are in their companies’ best interests.

We reported on this a few weeks ago, but new reports show some of the specific problems that the auto industry stakeholders are encountering.

First, some analysts estimate it takes up to 26 weeks for chip deliveries. But beyond that, chronic shortages are impacting any industry that relies on semiconductor installation for discrete manufacturing.

That includes businesses like auto production, smart phone and mobile device manufacturing, and the turning out of gaming consoles.

Reuters reveals the auto industry spends $40 billion a year on chips, and that the American industry makes up 1/10 of global demand.

In order to try to beef up semiconductor availability, Douglas Busvine and Christoph Steitz report, auto makers have tried asking national governments for subsidies, calling Taiwan to try to get more supply from TSMC, and trying to bully chip makers into prioritizing their industry.

There are a couple of problems with that last approach – first, that other avenues are more appealing to the chip makers because they can create multiuse applications. By contrast, car chips can typically only be used for cars, and so it makes more sense for chip makers to make them for smart phones and other devices.

The second problem is that the auto makers don’t have leverage over the chip companies.

In their coverage, Busvine and Steitz suggest that over time, the car makers and the chip companies will forge a closer relationship, which will help resolve the problem. For now, though, analysts estimate that the lack of cohesion between these two industries is jeopardizing the production of a million light vehicles each year.

If you have tech holdings or auto holdings or any mix of the two, you owe it to yourself to stay engaged in the debate about semiconductors for vehicles. Whether it’s safety, infotainment or engine performance, semiconductor technology is becoming a much more fundamental part of what we drive, and that’s going to affect multiple markets and multiple sectors.