The pandemic slammed many supply chains, but the supply chain issues in the semiconductor business fell particularly heavily on the auto industry, with big auto brands like BMW and Volkswagen, Ford and General Motors all warning of the impact of the chip shortage on production. AlixPartners has almost doubled its prediction of estimated losses since May of $110 billion to $210 billion. It’s forecasting that auto makers won’t produce 7.7 million units in 2021, up from 3.9 million in its May forecast. The drop in output is mostly but not solely down to the global chip shortage. SEE: Europe wants to be a computer chip powerhouse again. It’s not going to be easy Chip foundries, or contract semiconductor manufacturers, generally focus investments in higher value chips for computers and smartphones using new manufacturing processes. The auto industry was caught out because vehicles use cheaper chips created with older production techniques for vehicles’ micro-controlling units (MCUs). Intel, for example, is struggling to achieve a 7nm process. IBM is experimenting with 2nm technology. And while semiconductor giant TSMC in July announced it had achieved a 30% bump in MCU output, automotive was less than 5% of TSMC’s revenues in Q1 2021. The company predicted semiconductor supplies remain constrained until 2023. AlixPartners consultants predict a similar timeframe for the auto industry’s chip constraints to be resolved. “Of course, everyone had hoped that the chip crisis would have abated more by now, but unfortunate events such as the COVID-19 lockdowns in Malaysia and continued problems elsewhere have exacerbated things,” said Mark Wakefield, a lead in AlixPartners auto and industry segments. “Also, chips are just one of a multitude of extraordinary disruptions the industry is facing – including everything from resin and steel shortages to labor shortages. There’s no room for error for automakers and suppliers right now.” SEE: Smartphone sales are riding out the global chip shortage The chip shortage has made some nations and regions rethink how these supply chains can affect the wider economy. For example, the European Commission has the optimistic goal of boosting its marketshare from 9% today to 20% by 2030 as part of its digital sovereignty push. However, EC president Ursula von der Leyen admitted last week that the EU’s chip objective was a “daunting task” that some people think will be impossible to achieve.
