Chip shortage is causing automakers to cut production globally

2020 was a peculiar year for all the big industries. Unforeseen like COVID-19 or the lockdowns globally, they caused large companies to improvise, thus getting out of their routines. This it also affected automakers that, with wrong planning, are now suffering the consequences. An example of this is the lack of chips that causes some to have to reduce their production of new vehicles.

One of the first problems automakers faced was the lockdowns themselves. This stopped the production of many factories, some made more noise than others, such as Tesla with Elon Musk challenging everyone. Now they are facing the second big problem: there are not enough chips for everyone.

Priority for consumer electronics

At the beginning of 2020 and with the change of routines, the automobile industry predicted that not as many cars would be sold for a season due to the stoppage of trips and the confinements that prevented movement freely. In consecuense, decided to buy fewer chips for the next few months since they weren’t going to make and sell so many vehicles anyway.

It was not soTo the surprise of all cars, they have continued to sell the same as before or even more. People continue to prefer private transportation because of the safety it offers from COVID-19 compared to, for example, an enclosed and crowded bus. Besides that it is difficult to track the contagions that this produces. Therefore, several large manufacturers have found themselves in the situation of just not having enough chips to put in their vehicles.

A car it doesn’t have to be extremely modern, electric, or self-contained to include processors inside. Even the most basic cars have processors to regulate, for example, the engine power or in general the “minimum” electronics that are in their system. The number of chips and systems in an autonomous car is even greater.

But why not just buy more chips? There are none, there is no supplier capable of manufacturing all of those that are being demanded globally. In addition, it is prioritizing consumer electronics devices. Phones, tablets, computers, smart watches and in general smart home devices have higher priority than vehicles.

This is due to two reasons, the first of which is that simply the amount contracted by consumer electronics manufacturers is much higher. There are many more phones and tablets manufactured than cars in the world, so suppliers prefer to satisfy these customers rather than those who make cars. On the other hand, consumer electronics manufacturers tend to bid higher for chips than automakers.

Son several manufacturers that are running into this problem right now. General Motors has asked the Taiwanese government for help to secure its supply. Volkswagen is alerting of it. Nissan directly has reduced production. Honda is in the same.

Via | NPR