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How Chip Shortage will Affect Automobile Manufacturing in 2022

How Chip Shortage will Affect Automobile Manufacturing in 2022

Semiconductors run a broad array of devices, from smartphones to automobiles. So nobody should anticipate the chronic chip scarcity that has afflicted the IT industry and reverberated across sectors ranging from gaming systems and cellphones to autos to subside any time shortly, judging from recent remarks from a diverse group of industry representatives and experts. 

Semiconductor makers will ultimately be ready to meet the increasing demands that started shortly after the COVID-19 epidemic began, but we don’t know if that could happen this year or next. However, the possibilities of this happening anytime soon are very slim.

Chip Shortage Over the Years

Worldwide chip shortages from 2020 to 2021 will impact around 170 industries and essential products, such as automobiles, memory chips, and gaming consoles. 

The negative feedback loop of the COVID-19 outbreak is one factor contributing to the worldwide chip issue. In addition, some likely elements comprise the trade dispute between the US and China, and there’s also the case of Taiwan’s 2021 weather crisis

Additionally, automotive producers globally expected a fall in demand during the pandemic’s early stages. Consequently, these businesses elected to buy lesser semiconductor chips to save money on stockpiles throughout the lockdown time.

Nonetheless, due to the virus outbreak, individuals started updating their PCs, laptops, smartphones, and other technological devices. Sony launched its latest device, the PlayStation 5, to glowing ratings and massive numbers of pre-orders throughout that period. 

Consequently, the clamor for memory chips has surged due to their growing usage in gameplay, graphics creation, and cryptocurrency processing. Despite demands for semiconductor chips momentarily declining in the automotive sector, they increased in every other sector.

Additionally, the chip scarcity posed challenges for vehicle makers, as they could not restore regular production due to an unexpected shortfall of semiconductor chips. 

Auto companies halted orders notably, whereas semiconductor makers altered their attention to consumer items to fulfil the epidemics’ rising demands. A chip scarcity occurred upon reconfiguring their plants to create semiconductors for consumer products instead of autos.

What Brought About a Decline in Semiconductor Producers?

Semiconductor producers can meet the rising demand for every product provided adequate production volume. Unfortunately, semiconductor chip production is complicated, with too much time consummation, and it utilizes a costly procedure that creates hurdles for participants. 

Presently, 3 producers govern the semiconductor sector: Samsung, Intel, and Taiwan Semiconductor Manufacturing Company. However, production issues were compounded by a limited selection of producers and an unanticipated increase in market demands. Additionally, due to the lack of memory chips, manufacturers raised their costs, increasing the cost of Laptops and Personal Computers.

What Measures are Being taken to Alleviate the Worldwide Chip Shortage?

Because semiconductor demands are likely to increase as other sectors adopt digitalization, chipmakers, and regulators are collaborating to increase the efficiency of the distribution network. 

The Taiwan Semiconductor Manufacturing Company, for example, is spending One hundred million dollars in additional output throughout the next couple of years; meanwhile, SK Hynix, the Government of South Korea, and Samsung jointly pledged Four Hundred and Fifty-One billion dollars in chip production infrastructure and subsidies.

How will the Worldwide Scarcity of Chips be Resolved?

While the provision of semiconductors was expected to improve by the conclusion of 2021, researchers fear that the global chip shortage might last for the remainder of the year and perhaps into 2023.

Assuming the present worldwide chip shortage is remedied, more supply constraints may occur as the need for electronics keeps increasing. “The capacity that chip manufacturers are now constructing will serve for the next several years, and when these things come online, there will be an excess of capacity,” Alan Priestley noted.

The CEO of Intel, Patrick P. Gelsinger, claimed that he expects the chip scarcity to increase in the latter quarter of 2021 and that recovery would be over in at most 2 years. 

Reports from other perspectives see that the CEO of Nvidia Jensen Huang claimed to expect the shortage to continue further in 2022, while the CEO of AMD Lisa Su predicts that the shortage would narrow once it reaches the second quarter of 2022. 

Availability, on the other hand, will stay constrained till then. Far beyond probability, the CEO of IBM Arvind Krishna remarked, the chip shortfall would last throughout 2023 or the latest 2024.

Simultaneously, in conjunction with the US Government, the European Union is aiming to invest billions in their nation’s chip production capacities, reducing their dependence on Chinese firms. 

Final Thoughts

Computer microchips are becoming essential, being present in all products, including computers, automobiles, refrigerators, and much more. 

Nevertheless, the increased demand for computer chips, which are utilized in products from automobiles to refrigerators, has clashed with the consequences of the coronavirus epidemic. 

This has led to a worldwide scarcity that is undoubtedly going to affect the automobile industry as more consumer product industries are in high demand for microchips. The semiconductor manufacturing sector aims to prioritize consumer products ahead of the automobile industry due to the shortage of microchips.

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