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Lack of chip: How does it affect automakers and electronics?

With the outbreak of his pandemic COVID-19:, consumers are increasingly buying computers as well as other electronics items to cope with the new conditions. This excessive demand, however, has led to a significant shortage of chips, thus threatening global car production. But let's look in more detail at how the automotive and electronics industries are affected.

On February 9, General Motors (GM) announced that it would extend production cuts to USA, Canada and Mexico by mid-March. In addition, other major automakers, including Ford, Honda and Fiat Chrysler, have slowed down vehicle production due to lack of chip.

Lack of chip: How does it affect automakers and electronics?

General Motors is not the only one struggling to get enough semiconductors to build its products. THE AMD and Qualcomm, which sell chips to most of the leading electronics companies, have been in short supply in recent weeks. Regarding electronics, the Sony blames the lack of chip for making it so difficult for consumers to get it PlayStation 5.

Chip supply is expected to remain low in both the automotive and electronics industries in the coming months, as demand remains higher than ever. The Semiconductor Industry Association said in December that global chip sales would increase by 8,4% in 2021, from a total of $ 433 billion by 2020.

Lack of chip: How does it affect automakers and electronics?
Lack of chip: How does it affect automakers and electronics?

Semiconductors are in short supply due to strong demand for electronics, which has shifted business models into the world of semiconductors that have created a barrier between outsourcing chip factories and the effects of the US trade war. China which began under the presidency of Donald Trump.

As mentioned earlier, the global health crisis has significantly increased the demand for consumer electronics.

In the first phase, consumers were buying computers, monitors and other tools for teleworking and distance learning. Then the market grew Gadgets such as game consoles, televisions, smartphones and tablets. It is worth mentioning that PC sales increased by 4,8% in 2020, with an increase of more than 10% during the holiday period, according to data from Gartner.

Lack of chip: How does it affect the car industry?

All of these devices include a ton of chips - not just the CPU, which can cost tens or hundreds of dollars, but also less expensive small chips for screen control, power management or 5G modem function.

Electronics giants who have reported record sales say they could have made even more profit if there had been more supply. THE Apple, which recently reported a $ 111 billion boom, told analysts it did not have enough supply for its young iPhones to meet demand. The company 's CEO, Tim Cook, told Reuters that "the semiconductors are limited".

Also, AMD CEO Lisa Su, the processor at the heart of Sony and new consoles Microsoft products, said last month that it expects shortages at least in the first half of the year. "The industry needs to increase overall capacity levels," Su said.

The shortage points to a structural change in the semiconductor industry. Many of the leading semiconductor companies are now "fabless", which means that they only design chips and technology on them.

Lack of chip: How does it affect automakers and electronics?
Lack of chip: How does it affect electronics?

However, the shortcoming does not exist only in the faster chips, but in everything.

In addition, cars now include many tiny chips, many of which perform functions such as power management. Cars also use many microcontrollers, which can control traditional car operations, such as the power steering, or is the brain at the heart of an entertainment system. Car manufacturers also often use "just-in-time" production, which means they avoid storing extra spare parts.

"If the chip that powers the dials in the car or the automatic braking is delayed, then so will the rest of the vehicle," said Bryce Johnstone, automotive parts marketing director at chip designer Imagination Technologies at CNBC.

The US-China trade war
Last year, the United States imposed restrictions on China's Semiconductor Manufacturing International (SMIC), preventing it from acquiring advanced chip-making tools and making it much harder to sell its finished products to U.S. companies. Customers had to transfer their orders to competitors, such as TSMC.

SMIC officials acknowledged that the US move had prevented it from using its full potential, saying geopolitical factors would prevent it from taking advantage of this year's "rare market opportunity", citing a chip shortage.

Some companies have also decided to stockpile basic chips ahead of the US deadline, reducing production capacity last year. For example, the Huawei collected critical radio chips before the sanctions, Bloomberg reported.

The build-up also raised supply concerns as the COVID-19 pandemic hit the world. SK Hynix, a major memory chip maker, said last July that it had seen an increase in sales due to "growing concern about the IT supply chain in general".

It is noteworthy that companies that have stored chips are now reaping the benefits. For example, one of the largest car manufacturers, the Toyota, said on February 10 that it does not expect a reduction in its production rate because it has stored a chip worth four months to overcome the deficit. Toyota increased its full-year profit forecast by 54%. It remains to be seen how things will turn out for the rest of the car industry, but also for the other companies that are affected.

Source: cnbc.com

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