The current chips crisis has delayed car production and the manufacturers are looking for new suppliers who can provide the required amount of the semiconductor chips. The situation for the car industry is extremely staggering if you look at the data provided by the analysis company IHS Markit. The company predicts the global car production in 2021 would be down by 671,000 units, as the crisis has affected almost every car manufacturer. And this figure is even higher if you look at data provided by other analysis companies. Ford has predicted that its profits could drop significantly in the first half of 2021.
The chips shortage first came into light last year when the initial lockdown began to ease. There was a very high demand, and the companies had to quicken the production process. The demand for vehicles dropped significantly during the lockdown, so the chip manufacturers had to find buyers, and they found phone and tablet manufactures, who were enjoying the rise in demand for their products.
The manufactures are not the biggest customer for the chip makers; that’s non-automotive companies. The chief operating officer at Nissan, Ashwani Gupta said that the car companies purchase only 10% of the chips, so it only makes sense to allocate the capacity to the rising industries.
So when they know for a few months that there is a chips shortage, why they haven’t found a solution, you might ask. Well, manufacturing chips is not easy nor cheap. If there are capacity issues, you can just fix them easily or quickly. IHS Markit predicts the shortage could continue for a few months more.
The cars produced today contain several chips with their ECUs that handle everything from airbags to windows, ABS, lights, and engines. Modern cars need a higher amount of chips than the vehicles before, and this number is continuously increasing. Chips are both simple and complex, and where the simpler ones can be built in-house, you need more computing capability and advanced technology to build the complex ones.