Global Chip Shortage Cripples the Auto Industry

A global shortage of semiconductors that began in 2020 forced automakers around the world to slash production through 2021. The crisis started when carmakers cancelled chip orders during the early COVID-19 lockdowns while consumer-electronics demand surged, leaving foundry capacity fully booked when auto orders returned. A fire at Renesas Electronics' Japanese plant — which supplies roughly 30 percent of the world's automotive microcontrollers — and a winter storm in Texas that shut down Samsung and NXP fabs made things worse.

Major automakers including Ford, General Motors, Toyota, Volkswagen and Honda idled plants across North America. Ford warned the shortage could halve its second-quarter 2021 production, costing it about $2.5 billion and 1.1 million units. The U.S. motor-vehicle sector lost 27,000 jobs in April 2021 alone, and industry analysts at IHS Markit estimated more than 1.3 million vehicles were lost from North American production in the first quarter.

The shortage became a wake-up call for U.S. policymakers: automakers and the United Auto Workers urged Congress to fund domestic chip production, and the crisis directly shaped the legislation that became the CHIPS and Science Act. Analysts warned the crunch would persist into 2022 — and it did, affecting everything from cars and gaming consoles to washing machines.

Source: Reuters (May 2021); NDTV Gadgets 360. Reference: Chip Shortage: Auto Sector Urges US Congress