On Chip Shortage Affecting Car Supply, 93% Think It’s a Big Deal

The auto industry is fully aware just how bad the current chip shortage is. Anecdotally, this has been clear for a while. Ford CEO Jim Farley, for example, recently said that the chip shortage is “perhaps the greatest supply shock” he’s ever seen. Automotive News used that quote in a new survey of automakers and suppliers called Examining the Global Chip Shortage, which gives us plenty of survey data to back up the feeling that this is a big, big deal.

Perhaps the most surprising number in the survey is that only—yes, only—93 percent of respondents said that they think the chip shortage will have a severe impact on the auto industry. The survey was conducted a month ago, before recent estimates put the shortage’s impact on the auto industry at $110 billion in lost revenue this year. But even in January, the estimates were around $50 billion, which apparently wasn’t severe enough for 7 percent of respondents.

There’s also the feeling that the chip shortage will stretch out for most of the rest of the year. Almost three-quarters of respondents, 72 percent, said they expect the chip shortage crisis to impact the industry for at least six months.

Just a reminder that the shortage of the chips, used in cars, computers, and other products, was caused by worldwide demand for electronic goods that intensified because of the coronavirus pandemic, along with inadequate planning in the supply chain and weather problems. As the New York Times pointed out, a new vehicle can have up to 100 of these semiconductor chips on board; they’re used (and needed) in components from touchscreens to transmissions.

While there have been efforts to start making more semiconductors in the U.S., newly proposed plants will take time to build and start producing chips. The survey provides us with some insight into where automakers and suppliers are getting their chips now: 53 percent get them from outside the U.S. today and 55 percent are looking to source chips from outside the U.S. in the future. Forty-eight percent said they’d rather buy chips from domestic suppliers.

Survey respondents were somewhat uncertain about which segments of the industry will be most impacted by the shortage. Half (49 percent) said it will be the automakers, while 30 percent believe dealers and retailers will be hardest hit, and 23 percent said it will be the suppliers.

If there are bright spots to be found in the numbers, they lie in the way the industry is adapting to the situation. Almost half, 42 percent, of automaker and supplier respondents said they have already changed, or will implement changes, to the ways they mitigate supply chain risk, and 26 percent said they have found alternate sources for the chips they need. That means 74 percent of the industry, as of mid-April, hadn’t yet found a solution to the shortage itself, but there are other ways of mitigating the mess.

As we’ve previously reported, many automakers—38 percent, in the survey—have at least temporarily stopped some manufacturing. Another third, 32 percent, have shifted production to vehicles or components that are less impacted by the shortage, and almost half, 46 percent, have prioritized making high-demand products.

The survey was conducted in mid-April of 475 Automotive News subscribers and readers, which the publication said represent a “diverse sample of automotive professionals who represent various companies and levels and areas of expertise across the industry.”

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