Lack Of Computer Chips Trips Up Some Automakers

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A worker is seen inside the production chain at Renesas Electronics, a semiconductor manufacturer, in Beijing on May 14, 2020. A global computer chip shortage is affecting automakers.

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Nicolas Asfouri/AFP via Getty Images

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At the same time, demand for chips from other sectors — like consumer electronics — was also increasing.

«Every school district in the country had to buy new computers,» Dziczek says. «And the consumer electronics industry, as I understand it, pays a little better than the auto industry for these chips.»

Ann Kim, the head of the Frontier Technology Group at Silicon Valley Bank, says rising demand for cloud services and Internet access is also pushing data centers to snap up more semiconductors. «The average consumer probably has seven or eight devices that are all connected to the Internet,» she says. «As everyone stays home longer, everyone needs more access to data.»

Chip manufacturers are working to increase production to meet all this demand. But computer chips are very complicated to manufacture. The fabrication plants where they are made can cost tens of billions of dollars to build, Kim says.

According to Continental, a major supplier of auto parts to carmakers, the global supply chain simply couldn’t keep up.

«With lead times of six to nine months, the semiconductor industry has not been able to scale up fast enough to meet this unexpected growth in automotive demand,» a Continental spokeswoman says. «The bottlenecks from the semiconductor industry are expected to continue well into 2021.»

For car shoppers, this could mean some models of vehicle are harder to find for the next few months. (Supply was tight even before this, as carmakers are still trying to catch up after last year’s production halts.)

For auto workers, a Ford spokeswoman says the issue affects the entire global auto industry and «could have a significant knock-on effect on jobs and the economy given the importance of auto manufacturing.» So far, the consequences have been uneven. Ford and Fiat Chrysler have entire plants on pause, while General Motors says its manufacturing operations have not been affected, and Toyota does not expect any impact to employment.

The United Auto Workers, which represents factory workers at Ford, GM and Fiat Chrysler plants, notes that its contracts include «unemployment and supplemental pay» for workers affected by production downtimes.

Meanwhile, for semiconductor manufacturers, this crunch presents new opportunities.

The semiconductor industry «hasn’t been as trendy to talk about» in recent years, Kim says, but suddenly everyone is paying attention.