A Semiconductor Shortage Is Slowing Production On Some New Cars

We live in an era where delivery is practically on demand and gratification is as close to instant as it has ever been. With that comes some challenges in supply chains of every industry, including automotive manufacturing. For cars in 2021, a semiconductor shortage is stalling the production of heavily computerized vehicles that require microchips to function as designed.

Which automakers are affected by the semiconductor shortage?

In North America specifically, there are four manufacturers that are experiencing the effects of the microchip shortage:

• Ford
• Fiat Chrysler Automobiles (FCA)
• Toyota
• Subaru

All of these companies have reportedly had to adjust their production schedules. Specifically, Ford has put a pause on the production of the Escape and Lincoln Corsair, both of which are built in their Louisville, Kentucky facility. 

For FCA, the Jeep Compass as well as the Chrysler 300, Dodge Charger and Dodge Challenger have been stalled in Toluca, Mexico and Brampton, Ontario, respectively. The Toyota Tundra’s Texas home base has also been affected by the semiconductor shortage. Meanwhile, some Volkswagen (and by attachment, Audi) vehicles are slowed.

It’s not just North American businesses seeing the effects of low microchip availability. There’s also brands like Volkswagen, Nissan and Honda, all of which operate outside of the continent.

Yet another hurdle to post-pandemic normalcy

While the COVID-19 pandemic ravages on, automakers are trying to figure out how to operate beyond shutdowns. Even when they can operate in their warehouses, they’re still relying on supplies from various companies, some of which might be difficult to get. This is the root of the semiconductor shortage.

The semiconductor shortage started in December 2020 and has seeped into the new year. Automotive suppliers Bosch and Continental were the first to confirm the trajectory of a semiconductor shortage, which inevitably would lead to a stall in microchip production.

In response to the semiconductor shortage, buyers may notice a lack of certain merchandise on dealers’ floors. In a normal circumstance, limited supply correlates to a higher price tag (because of rarity), but stalled production from a microchip shortage doesn’t lead to the same fate. Buyers will still be able to negotiate the MSRP as if the model were widely available, because—let’s face it—revenue is a key concern for the industry right now.  

What’s a new car without the necessary microchips?

Quite frankly, a new car uses thousands of microchips for its various high-tech purposes. One example is headlights, especially those equipped with sensor technology to help with lane-keep assist and radar cruise control. That’s not even to mention things like bluetooth connection, Wi-Fi hotspots and electric vehicle diagnostics.

Where are all the microchips going?

Without an unlimited microchip supply, suppliers must choose which companies—and industries—they distribute to. As you may know, the automotive industry is not the only sector to request semiconductors. 

The consumer electronics niche is a primary target. The general growth of phones, laptops and other computerized technology means more microchips are going towards electronics and away from vehicles. 

That’s not to say that they’re more interested in phones than cars (could we really do without either anymore?), but that the demand for one is currently outpacing the other. When automotive demand shrunk during the pandemic, consumers were thirsty for things like PlayStations and Xbox devices and brand-new iPhones. With social distancing the contemporary status quo, it makes sense that these electronics grabbed hold of and redirected the supply chain.

In a post-Trump government, it’s fair to recognize that the U.S.-China trade war also has resulted in fewer microchips coming into America. That’s why such key domestic auto manufacturers have had such trouble with the microchip dilemma.

It’s not that the semiconductor shortage will necessarily lead to a long, drawn-out shortage of vehicles. Rather, there will be incremental gaps in production, so consumers will likely be able to wait it out.