Global shortage of semiconductors is slowing production in the automotive industry

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The pandemic forced people to work from home and their children began distance learning alongside them.

Remote workers began updating their devices, which led to an increasing demand for laptops, phones, bluetooth accessories, and many other electronic devices.

All of these devices require semiconductors to function because they act as the brains of electronics.

Greg DeYong, SIU associate professor of operations management, says the automotive industry is struggling to manufacture vehicles due to the global semiconductor shortage.

“Unfortunately, what really happened in the beginning happened during the initial stoppages for Covid.

The canceled orders were quickly replaced by semiconductor orders for other electronic devices.

DeYong says it can take up to seven months to manufacture semiconductors from start to finish.

“When they got back to work in the semiconductor chip industry, they couldn’t catch up because all of a sudden all orders came back and there was no way to catch up.”

Watermark Ford and Hyundai Sales Manager Jesse Edwards says they typically have more than 200 new cars in stock before COVID-19, but now …

“We’ll run away somewhere between 10 and 20 percent. Lately we’ve had around 25 to 35 new cars at the same time. “

Edwards says that with lower inventory levels, manufacturers are rethinking how they make vehicles and what options they offer.

“The more devices you want, the bigger the battle you might say, but at the same time, manufacturers are smart at analyzing customer demand, so they don’t build us a lot on cars that people don’t want to have they focus on, you know what spins quickly, what is sold quickly, what the market actually demands, and that’s how they put their resources into it. “

While the automotive industry waits for the supply chain to deliver products, so do car buyers.

“It was once eight to ten weeks. We saw three to six months. There are some limitations with materials other than chips, even if the focus is on chips. “

DeYong says several industries have become aware of this global shortage and have changed their approach to selling products.

“They also do the same thing as Apple, which is products with higher profit margins. So you will see a much better supply of SUVs than small, cheap cars because that is where the money is right. ”Now, but they are really leaving features out of the cars because they don’t have the chips to support them now. “

The semiconductor industry has struggled with its own problems, and Edwards says this had a huge impact on the supply chain.

“The plants that make these chips have fallen victim to Covid outbreaks to further shutdowns, fire damage, some are made in Texas, and blizzards are taking these off for a while.”

DeYong says the impact has been huge due to the number of manufacturers around the world.

“You know, it’s one of the things that the industry has been consolidating on for a while, and we didn’t really realize it. And so one day we suddenly woke up and said: Wow, there is only one American manufacturer that makes chips, that’s Intel. And there are only a few left in the world where there used to be dozens of chip manufacturers. “

Analysts predict the supply chain will catch up within the next two years.


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