Jun 04, 2023

How can the automotive industry deal with the upcoming chip shortage?

  • By Deirdre Mathis,
How automotive manufacturers can prepare for ongoing chip shortages

The shortage of semiconductors has hit the industries hard. In a phase where industries are trying to regain their economic strength, this shortage has a mammoth impact. Agriculture, food processing, life sciences, and a total of 169 industries are hit by the shortage. Automotive is the worst impacted among all and getting their product to market is quite challenging. The crisis is here to stay, and we don’t see a change in the short term. The automotive industry has to prepare for the chip shortage, and here is how.

What is the cause of chip shortage?

To deal with the problem it is essential to understand it, properly. The shortage of chips is a global scenario. People were stuck at home during the pandemic, and there was a sudden increase in the demand for devices. People purchased more gadgets for home use to make life simple. These gadgets need numerous chips. Laptops. Smart TVs, tablets, smartphones, security systems, appliances, and gaming consoles are quite high in demand. The products are all chip-based, and industries consumed more chips from the market. The result is a shortage of chips for every sector. The surge in demand was unforeseen and was not as evident as sanitizers and tissue papers. The companies that produce chips will have to fill the gap in the market and produce more than usual to meet upcoming demand. This will take a lot of time to get normalized.

How automotive industry was impacted due to the chip shortage?

A typical vehicle needs 1400 chips and above. People avoid public transport these days, and they are investing money in automobiles. The demand has drastically increased in the market. However, every industry has an increased demand as far as chips are concerned. In such a scenario, many automotive companies had to slow down production till the availability of the required chips. Some of the manufacturing facilities were temporarily shut down. The impact was quite massive as vehicle sale drops even when the demand was high. AlixPartners predicted that the chip shortage will make the automotive industry love 210 billion in 2021.

How can the automotive industry deal with the upcoming chip shortage?

The economic shift has taught the world that disruption can come at any moment. The supply chain plays a major part in keeping the production process alive. The companies that integrate their supply chain process strategically in production will be benefitted in the long run. There needs to be a transparency of data from the production to the supply chain. Any demand can be met, with an immediate result. The planner will know sooner about the shortage, and they will be able to deal with the problem before production stops.

Semiconductor or chip requirement is here to stay. Industries have already increased their market demand, and chip-producing companies are trying their best to deal with the problem. Some prediction says that the shortage will be met by end of 2022. Some others have predicted it will be over in the mid of 2023.


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