If you’ve tried buying any electronics in the past year, you may have noticed a significant increase in pricing and a decrease in supply. Due to the COVID-19
pandemic, there has been a massive surge in demand for electronic goods and other related products such as computers, gaming systems, and cars.
The pandemic affected many industries because of the high demand for products due to people being stuck at home. In particular, the auto industry has especially been affected due to a worldwide microchip shortage.
Here is a look into how semiconductor production shorted out and what this could mean for the automotive industry going forward.
Why Is There a Microchip Shortage?
There are many reasons why a microchip shortage exists in the automotive industry. Although the shortage can mainly be attributed to the pandemic, technological and geopolitical limitations have also affected the high volume manufacturing of products.
The COVID-19 pandemic disrupted the leading supply chain of microchips. Chip factories were forced to shut down during the pandemic because of government mandates and worker safety. Some overseas factories even halted production.
There was also a spike in demand for electronics as people stayed home. Manufacturers of computers, game consoles, and even cell phone network providers were all impacted by the sudden demand. Electronic products use thousands, or even millions, of semiconductors on a single microchip, so it’s no wonder production was disrupted due to low supply.
When factories finally reopened, workers were backlogged with an abundance of orders. Manufacturers are still constantly working to catch up with microchip orders and the still-high demand.
How Does a Microchip Shortage Affect the Car Industry?
Although the pandemic caused a lot of economic uncertainty, it seems that consumers are still looking to spend money on vehicles. Demand is especially surging for cars that are becoming increasingly computerized. New vehicles can use up to 100 microchips for anything ranging from touchscreens in the cab to the mechanical workings of the transmission.
The automotive industry was already short on supplies because of the pandemic, so the additional microchip shortage has caused quite a burden for auto manufacturers.
Effects On Car Manufacturing
Typically, automakers build out vehicles from start to finish with few variances. Unless a defect is spotted with a particular component, minor revision is usually involved in the process.
Since the microchip shortage began, some automakers have stopped production all together due to a lack of electronic semiconductors from automotive suppliers. Others have shifted production to certain cars or components that are less impacted by the shortage. Overall, many manufacturers have created partly finished vehicles as they wait for suppliers to meet demand.
There has been a high demand for industrial storage since many manufacturers are parking their vehicles and waiting for microchips to arrive for installation. American Manufacturing offers industrial storage for various products we sell, as well as other material handling that requires climate controlled indoor storage.
The auto industry has more demanding requirements when using microchips than other electronic products because of the safety features involved in making a vehicle. Manufacturers must use microchips that are built correctly and meet specific standards. Cars must meet requirements like resistance to movement and vibrations and environmental factors such as extreme weather.
Many car manufacturers have been looking to get chips from suppliers overseas rather than rely on domestic suppliers. These automakers have prioritized making high-demand products even amidst the shortages.
Effects On Car Sales
Vehicle sales have been up in the last year. Even amongst the economic uncertainty of the pandemic, many consumers have chosen to buy new cars. Now that people are beginning to go back to work and travel restrictions are lifting, new customers are attempting to buy cars even with limited availability in inventory.
Consumers should expect to pay more for a new car considering the auto industry’s supply is still not keeping up with demand. Even used cars are selling at more expensive rates, with prices comparable to new models.
Fortunately, for people looking to trade in for a new car, trade-in values for older vehicles have increased. Although consumers may have to settle for lower-end car models with less extravagant electronic features, they may be able to get more money if they trade in their current vehicle.
How Does a Microchip Shortage Affect American Manufacturing?
Although the microchip shortage has impacted the assembly line process of automobile manufacturing, we have seen a high demand for our products. The auto industry has ramped up production in order to get their 2021 and 2022 models out the door. As we work to keep our costs low for customers, we can still provide affordable products such as steel containers, pallets, and industrial carts to allow manufacturers to work efficiently and effectively.
When Will the Microchip Shortage End?
It’s hard to say when the microchip shortage will end. Many suppliers are estimating that the shortage will continue throughout 2021 and into 2022. Although manufacturers are catching up, they are still only meeting the minimum demand for chips, causing the shortage to go on even longer.
Even if new factories are built in the coming months to compensate for the shortage, microchips still won’t be produced fully for at least two to three years. With so much uncertainty around when the microchip shortage will end, consumers should expect to be impacted by higher prices, at least through the first half of 2022.
Preventing Microchip Shortages in the Future
To prevent supply shortages from happening in the future, many chipmakers are investing millions of dollars in building new factories. Automakers are also adapting to changing supply and demand trends by making future changes to better mitigate the supply chain. Some have even found alternate sources for the microchips they need.
Going forward, manufacturers in the auto industry will increase supply capacity to accommodate the continually growing demand. The microchip shortage has made a massive impact on the auto industry, and there’s no doubt it will continue to do so in the future.
At American Manufacturing, we want our customers to know that we are still manufacturing our products at a high rate to meet demands in the auto industry. Our experience enables us to produce a line of high-quality products and services. For more information, contact us today at 419-531-9471.