June 25, 2021

Gp Delivers1

The excellent automotive artisans1

Chip shortage shows need for new thinking about sourcing

New things in this business go according to plan.

The latest rogue wave to slam automakers and those who rely on them is a global microchip shortage that threatens to pull as many as 1.3 million vehicles out of production this year, according to one forecast. At an average retail price of $40,000 per vehicle, that’s a giant potential $52 billion economic hit at a time when automakers and suppliers are trying to get their finances back into calm waters during the pandemic.

But what is most notable about this latest crisis is just why there aren’t enough microchips available to service the automotive industry.

Yes, COVID-19 certainly played a role in limiting supplies for a time. But what’s exacerbating the problem is that the auto industry is increasingly competing with a vast array of divergent industries, including giant consumer electronics makers, for limited quantities of chips.

Microchip use within automotive manufacturing has exploded in recent years, thanks to the proliferation of electronic instruments, big-screen infotainment systems and chip-aided driveline components.

Automakers like to crow about their growing technological prowess but software still has to run through microchips to work.