Semiconductor microchip shortages are expected to continue to disrupt auto production in the coming months.
Semiconductors are an essential component of just about every electronic device we use. They are in communications devices such as smartphones, vehicles, computing devices, healthcare equipment, military systems, clean energy machines, and countless other applications says Hitachi-hitech.com.
Lead times for the purchasing of many semiconductors are one year out right now, reports the Harvard Business Review (HBR).
Because car makers have begun prioritizing electric vehicle production, which are electricity based as opposed to using fossil fuels, semiconductor chip demand has accordingly increased. The necessity of having this type of chip puts automakers in competition with all other industries using the same technology, according to Autoweek.
Automakers like Ford Motor were forced to cut production at seven plants in North America due to an ongoing global shortage of semiconductor chips, reported CNBC. The Ford plants impacted by the chip shortage are located in Illinois, Ohio, Kentucky, Michigan, Missouri and Ontario, Canada.
HBR recognized that the COVID-19 pandemic caused a steep drop in automobile sales in the early 2020. One result was that because automobile production was down, automakers necessarily cut their orders of all parts and materials including semiconductor chips. When the demand for automobiles increased, production of vehicles needing that type of chip also increased, resulting in an elevated demand for semiconductor chips. The problem is that chip manufacturers, with limited on hand supply, already allocated chips produced to other industries who were competing with automakers for the same chip.
Geopolitical factors also played a role in this crisis, reports the NY Times. Former President Trump’s China policy included an oversight of chip sales to Huawei Technologies, ZTE, and other Chinese firms. As a result, manufacturers stockpiled the chips. American companies could not purchase the chips made by China’s Semiconductor Manufacturing International Corporation after the US government blacklisted the firm, says HBR.
The chip shortage will continue to affect automakers such as Ford in the near future, as several manufacturing plants in North America will face temporary stoppages over the chip shortages, reports Car and Driver.
Source: Newmax
