Auto industry hits a bump as semiconductor shortage pinches amid COVID-19 slump, unsteady US-China ties

 

• Strained by the crippling effect of semiconductor shortage carmakers suffer huge sales loss 

• Chipmakers await federal incentives for stimulating domestic production 

 

The worldwide semiconductor scarcity that has crippled automakers for over a year appears to be intensifying amid supply chain bottlenecks in Asian countries and the growing concern over new strains of coronavirus that causes COVID-19. 

The pandemic-induced lockdown caused more automakers and electronics firms to cease production which resulted in losses in sales amounting to millions of dollars that they anticipated to recoup in 2021, but a semiconductor chip shortage now makes that impossible to achieve.  

Read more: Apple to sell fewer iPhones mostly due to global semiconductor crunch, J.P.Morgan says 

Carmakers' prospects of resolving the chip shortage anytime soon appear to be fading. A new estimate by IHS Markit forecasts that the car sector will not rebound until the first half of 2023. However, it is predicted that output levels are likely to rise in the second quarter as supply chains return to normal. 

Congress stimulus sought 

Automobile manufacturers have been urging semiconductor companies to produce more chips for automobiles. Chipmakers claim that the car sector harmed itself by canceling semiconductor purchases following the COVID-19 pandemic. 

Also read: Hyundai to develop own chips to reduce dependency on chipmakers 

Meanwhile, chipmakers are eagerly awaiting Congress' approval of $52 billion in federal incentives to stimulate domestic chip manufacture. The Biden administration says that although it can help, it wants the private sector to take the lead in resolving the situation, The Washington Post reported.  

During the pandemic, there was a large demand for semiconductors because of the increase in sales of electronic gadgets. 

Also read: Toyota to build $1.29B US battery plant employing 1,750  

However, COVID-19 is not the main cause of the scarcity. As many US corporations do business with Chinese enterprises, the strained relationship between the US and China is also an issue. The US government, for example, has banned Huawei, which supplied American semiconductor producers.

 

Shortages to continue 

Semiconductors, sometimes known as chips, have qualities that fall between those of conductors and insulators. Their manufacturing cannot be ramped up quickly. According to a Bloomberg report, manufacturing chips is a complicated process that takes months.  

Also Read: Apple's talks with Chinese EV battery makers CATL and BYD mostly stalled 

Pat Gelsinger, the CEO of Intel, the world's largest chipmaker, has stated that he anticipates shortages to endure until 2023. In recent months, companies like Toyota, Ford, and General Motors suspended production due to a shortage of semiconductors. 

The attempts of chipmakers like Taiwan's TSMC, which manufactures a type of chip that is extensively used by automobiles, to ramp up output by 60% this year compared to 2020, appear to fall way short of demand.