Semiconductor shortage will hit auto industry well into 2021

Microchip semiconductor shortage automotive industry

An ongoing shortage in semiconductor supply is disrupting production of parts and vehicles around the world. The supply bottleneck, which is caused by a combination of factors, including the impact of Covid-19 on production in the first half of 2020 and on manufacturing investment, is affecting a number of major carmakers and their suppliers.

The shortage is the result of a perfect storm, as the automotive industry experienced greater fluctuations in 2020 than any other industry buying semiconductors. At the same time, high demand from other industries led to capacity constraints in semiconductor facilities. The recovery in car sales and factory output that followed was faster than projected across all regions, driven by pent-up demand during the lockdown period.

“The automotive industry recovered much more quickly and steeply than expected, while the ramp-up of automotive semiconductor production for central supply parts was comparatively slow,” said a spokesperson for VW Group. “The result is industry-wide adaptations and reductions in automobile production.”

Global supply bottlenecks

Those reductions are happening on a global basis in the first quarter of 2021. All major OEMs have been affected, including Japanese carmakers Honda, Nissan and Toyota, all of which are reviewing production targets.

Honda admitted it was facing some supply issues related to microchip-related parts as a consequence of the impact of the Covid-19 pandemic. Production at the carmaker’s Swindon plant in the UK has been suspended for four days this week because of the supply shortage.

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