If you’ve tried to buy a PS5, an Xbox or a TV recently, you may have found new stock difficult to get hold of. It’s down to a shortage of a particular component: the semiconductor chip.
The semiconductor is the foundation of technology as we know it today, helping to run everything from computers and smart phones to washing machines and cars.
This shortage started in consumer electronics and is now having a serious effect on the automotive industry. The question is, how serious is it?
How did this shortage happen?
For the semiconductor industry, the pandemic was two-pronged. On the one hand, demand for electronic goods spiked because more people needed to work and play from home. The launch of two new games consoles – the Playstation 5 and the Xbox Series X – only increased demand further.
At the same time, production was slowed due to partial lockdowns of the factories, and there was also a fire at one of the largest manufacturers of semiconductors for the automotive industry.
How is this impacting the automotive industry?
As car manufacturers are collectively one of the smaller clients of semiconductor makers, the automotive industry is essentially bottom of the list for new ones, with computing, phones and connected devices making up around 89% of revenue. However, on average each car has between 50 and 150 semiconductors, so the impact is massive.
Many car firms have put out statements, with VW saying that they’re in “crisis mode”, and Ford admitting that it will produce 1.1 million fewer vehicles this year than it had expected. The Stellantis group (Citroën, Peugeot, Jeep and Chrysler) have begun replacing digital parts with analogue ones in their less popular models.
Goldman Sachs analysts have said that the reduced supply of semiconductors could boost prices by 1–3%. New car prices have already seen an increase in the US, with the average price 8.4% higher than a year ago.
When will it be resolved?
There’s no way to know for sure. Experts expect disruption to continue into late this year, with some predicting that games consoles will recover in early 2022 and other industries falling in line after that.
Cisco CEO Chuck Robbins said, “We think we’ve got another six months to get through the short-term. The providers are building out more capacity. And that’ll get better and better over the next 12 to 18 months.”