Microchip shortage hinders auto production, could impact other products

Published: Feb. 9, 2021 at 11:44 AM CST
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(CNN) - Many automakers have idled production lines because of a shortage of microchips.

It’s so easy to take them for granted - the tiny silicon-based semiconductors that fuel our modern lives, our smartphones, laptops and our cars.

The average car has between 50 to 150 chips that are used to monitor important engine and safety systems, along with GPS navigation or driver assistance when you try to parallel park.

But when the pandemic hammered auto sales last year, top chip makers shifted capacity away from carmakers to gadget makers, resulting in a critical shortage of car chips that’s been called “Chipageddon.”

“One million cars could actually be lost in the coming months. That’s quite a lot. If you take the average value of a car, which might be what, $20,000 - $30,000 maybe. It would actually lead to about $20 to $30 billion in lost revenue,” said Emmanuel Bulle, senior director of EMEA Corporates, Fitch Ratings.

Despite the shortage, Japanese automaker Honda’s quarterly profit has jumped nearly 70 percent. The company also raised its full-year profit forecast more than 20 percent.

However, there is a growing list of automakers cutting production because of the chip crunch: in Japan, Subaru, Toyota, Honda and Nissan; and in the U.S., Ford and GM.

In a statement, GM says: “Despite our mitigation efforts, the semiconductor shortage will impact GM production in 2021. We are currently assessing the overall impact, but our focus is to keep producing our most in-demand products.”

As the chip crunch disrupts production, analysts said it may delay a global recovery in the auto sector.

Senators are urging the White House to take action.

In a letter sent earlier this month, 15 senators from auto-producing states warned that the “shortage threatens our post-pandemic economic recovery.”

It’s also a diplomatic issue.

To resolve the shortage, the U.S. is working with Taiwan, home of TSMC, the world’s largest contract chipmaker. The Taiwan chip giant says the auto chip shortage is top priority.

As Taiwan pledges help, the other chip maker giant in Asia has issued a warning. Samsung Electronics said the auto chip shortage could hit smartphones.

If you’re planning a new purchase, consider this: “If you need something, just buy it now if is in stock. Otherwise, unfortunately, you will have to wait another three to six months according to our working estimates,” Bulle said.

Huge ripple effects are being felt across tech, auto manufacturing and the global economy, all from a tiny piece of silicon.

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