Global Chip Shortage and Automakers

In August, I wrote about the technologies I thought would impact the world most over the next 5-10 years. 

In that article, I also briefly identified the global chip shortage as a supply chain issue impacting millions of businesses, which could also become a significant barrier to businesses adopting A.I. at scale. 

 

via Marketoonist

Let's talk a little bit more about the scale of the shortage. 

Chips (or semiconductors) are used in substantially all the world's electronic devices – and the more complex machines can require not only more chips ... but also more complex chips. For example, a modern car can have anywhere from 500-3000 chips in them. 

When the pandemic hit, consumer demand shifts meant that semiconductor manufacturing had to slow down - and a foreseeable consequence of those actions presents us with the inconvenient truth that scaling back production can take up to a year-and-a-half. With demand increasing, the supply vs. demand ratio is getting more out of whack. 

Luckily for you, semiconductor manufacturers prioritize the more lucrative goods (like smartphones and other consumer electronics), but that means that it will be harder for small businesses to get them - and it's also severely impacting the automotive industry. 

 

via visualcapitalist

You'll notice that the most affected brands have more production in North America. The reason for that discrepancy is that U.S. manufacturers depend heavily on chips from Asia. The Senate has recently approved $52 billion in subsidies for N.A. chip manufacturing, which hopefully will lessen that dependence over time. 

If you were already worried about the skyrocketing prices of houses, you should expect to see a quick rise in the price of vehicles as well. 

Buyer beware!