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How the Semiconductor Shortage Impacts Vehicle Production

Posted by Wilmar, Inc.

 Semiconductor Shortage Impacts Vehicle Production

Modern vehicles are computers. The onboard screen is only the surface, a customer-friendly face on the vast system of self-monitoring controllers and telematics.

Beneath the dash begins the extending network of sensors and controllers, each powered by tiny semiconductor chips. A vehicle's electrical system is essential to its function, from the power steering to the anti-theft systems.

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It is with a dispersed computer system - spread through the body and around the cabin, that your car controls the door locks, tire sensors, AC, dash display, and almost all the recent innovations in safety and convenience features. Down to the most basic models, every car today is also a computer.

This is why the recent semiconductor chip shortage has been devastating to 2021 vehicle production.

Semiconductor Chips Needed for Automobile Production

Semiconductors are used in almost any product that computes. They are at the heart of every cellphone, appliance, computer motherboard, and graphics card. They are used in factories and manufacturing equipment, and 10% of the semiconductor global market goes to vehicle manufacturing.

The average car uses between 50 and 150 semiconductor microchips for sensors, controllers, and internal computing. However, a modern electric vehicle can use up to 3,000 semiconductor chips in a single-vehicle. This means that without semiconductors, vehicles cannot be produced even if all other materials are assembled and stockpiled. However, this shortage was not something foreseen until the pandemic caused a few major market shifts.

COVID's Impact on Semiconductor Production

During the pandemic, the demand for new vehicles plummeted. When lockdowns and remote work began, people stopped commuting and stopped taking business trips. LIkewise, auto factories were encouraged to send everyone home when possible. For a year the auto industry slowed its demand for semiconductor chips, and the suppliers adapted their production accordingly. At the same time, demand for PCs and graphics cards increased, reassigning semiconductor production capabilities, which were also limited by COVID restrictions.

Unfortunately, this left the market in an awkward position when restrictions lifted and demand for new vehicles returned in a surge of buyers eager for the latest models. The semiconductor industry was not ready to supply chips fast enough for modern vehicle production and demand.

The Semiconductor Factory Fire in March 2021

On top of the short market supply, in March of 2021, Renesas Semiconductor Manufacturing in Japan was hit by a major fire. This knocked out the factory's production and one-third of the globe's production for semiconductors. What this revealed to the industry is just how fragile this essential industry has been allowed to become. If one factory is providing one-third of the globe's semiconductors, and nearly every advanced production line needs semiconductors, there is simply not enough infrastructure to go around.

This has also raised the question of what to build next, as semiconductors require rare earth metals in short supply and are now-aging technology. New factories may be made for GaN chips or photonic chips instead, which could require the auto industry among many others to adapt to the new chips available on the market.

The Semiconductor Chip Shortage is Impacts Vehicle Production and Availability

So how does the semiconductor shortage affect vehicle production right now? The answer, unfortunately, is stopped conveyor belts. Toyota is cutting its production by 40%, without sufficient access to semiconductor chips to complete more vehicles, and other brands are in the same position.

For vehicle consumers waiting for the latest models, prepare to wait and prepare to pay more for new vehicles. With production delays already happening and more expected in the near future, fleet managers on a timeline should focus on vehicles that are already produced and available on the market. Roll your release expectations back one or two model years for a sizeable, uniform, and a cutting-edge fleet.

Until more semiconductor production is in place and the market adapts to increased demand, we can expect to continue seeing production delays in the automobile industry. Contact us today for more fleet management insights relevant to today's auto industry conditions.

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Topics: Fleet News, Misc


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