If you order a new top of the line sedan in Europe or North America these days, you might find there is a long waiting time unless it is a less popular model whose sales are doing poorly. The sudden car shortage has nothing to do with the spread of South African or Brazilian strain of the pandemic. The reason why automakers cannot make enough cars and why some plants of General Motors, Daimler, Ford, Toyota and Nissan are now idle is an acute shortage of semiconductors which power functions from brakes to emissions controls. “Electrification of vehicles is increasing the content of power chips ten-fold in every car,” notes Pierre Ferragu, an analyst for NewStreet Research in New York.
Moreover, the value of chips inside every car — over US$1,000 ($1,335) for Tesla’s new Model Y — has been steadily growing as the auto industry transitions initially towards semi autonomous and eventually self-driving technology. There is also a growing demand for chips that enable more infotainment and connectivity in vehicles.
Auto sales worldwide, including light commercial vehicles, fell 14.5% to just 71 million vehicles last year. That led to 8.4% decline in sales of chips made for automobiles to just US$37 billion. This year, revenues from automotive chips are estimated to grow over 18%. So dire is the shortage of auto chips that the German and Japanese government have publicly lobbied Taipei officials as well as chip industry executives to prioritise the manufacturing of auto chips. Global semiconductor revenues grew 6.5% in 2020, according to US trade group Semiconductor Industry Association. Tech research group IDC estimates that the worldwide chip market would grow 7.7% this year.