Automobile industry about to crash due to auto chip shortage?
Big car manufacturers announced that they are cutting their production due to auto chip shortage. And after that maybe the automobile sector is about to crash. The automobile industry faced a really hard time in the previous year. This is because of COVID. Although, the news of the vaccine gives relief to the auto manufacturers. But this was just a silence before the entry of another crisis. The whole world is facing a silicon chip shortage and the automobile industry is one of them.
What is an Auto Chip used in the automobile industry?
What is the difference between a car and a smart car? That is the Silicon Auto Chip. From the very first Carl Benz model to the upcoming Apple iCar, everything has changed in the automotive industry. Nowadays, the car consists of a silicon chip that integrates everything in the car from hardware to software. It enhances the safety of occupants. There are companies such as Nvidia, Aqauntia, etc that make some of the best miniature supercomputer auto chip for the automotive industry.
Global auto chip market
As per the survey, the auto chip market was valued 22.73 billion dollars in 2016. This will be expected to reach USD 56.24 billion by 2025. Smart features like navigation systems, infotainment systems, energy-efficient lighting systems, etc are creating a boom in the demand for auto chip. In the starting, only luxury cars were having an auto chip but now they are available for budget cars too. So as we see that the market of the auto chip is increasing day by day.
COVID made a negative impact on the automobile industry last year. Even 2020 is the year where only one car expo was organized. During this bad time, the chip shortage gives a severe blow to the automotive industry. And the industry has to overcome this crisis.
Why this auto chip shortage problem arises?
Have you ever wonder that the mobile phone you bought today will become outdated within a month or even less. Maybe you will get even a better option in that price range after a month. This occurs because of innovation’s quickness. Technology is changing drastically. And everything has its boom as well as a ban.
Car manufacturers couldn’t predict the accurate need for the semiconductor chip due to the pandemic. Also, some companies like Tesla enhance their technologies. And to overcome this gap and give the competition, the other companies will have to boost their technology.
Demand for silicon chips rises with the rise of consumer electronics during COVID lockdown. The consumer electronics sector was flourished faster than the automotive industry during this time. The maximum demand for silicon chips comes from the electronics sector. This leads to an imbalance in supply and demand for the automobile sector.
The automobile industry is the fastest-growing market in the semiconductor industry. Because the industry trying to stop the greenhouse gas emission and pushing itself to make EV cars or hybrid cars. And according to PriceWaterhouseCoopers LLP report electrics and hybrids use twice the semiconductor content as traditional cars.
All these points are the combined reason for the auto-chip shortage.
Effect of global chip shortage in the automobile sector
This shortage of chip interrupts the upswing of the automobile industry. As we understand, the chip is just like the CPU of the car. The automakers trying hard to overcome this problem. Especially car manufacturers of India and Europe struggling to source a sufficient amount of semiconductor chips. Nissan Motors, Ford Motors, and Fiat have said they would cut output in January due to a lack of chips. The world’s largest carmaker Volkswagen warned about this semiconductor chip shortage. This chip shortage becomes more intense upcoming months.
There is another problem arising with this shortage. An imbalance in supply and demand affect the price of the chip. This will lead to another dilemma, car price increase.
What will be the next step of the automobile industry?
Whenever the supply of automobile parts impeded, the manufacturers have only one solution left. To cut down their outputs till recovery of supply. But it will increase the demand for cars as well as the cost. Well, that is not the only solution. So another solution is to wait for the completion of demand. Germany asks Taiwan to help solve this dilemma. Taiwan Semiconductor Manufacturing Co. Ltd. made their priority to deal with this auto chip shortage. This will surely increase the productions.
This shortage is not permanent. It is a lesson to understand the value of recycling. Although the news is bad. But in a long run, this will make a positive impact on the automotive industry.
Well, the ups and downs are normal things for the manufacturing sector but if you want to learn more about the automotive world, check our other article on Movie Car: Which movie car would you like to take a ride at least once? m , Auto expo 2020: Throwback to the one and only Auto expo in 2020
and Apple Car: What’s so unique about the rumored Apple car