Chip Shortage Leading to New Car Delays

Chip Shortage Leading to New Car Delays

Car production across the globe is experiencing significant delays due to a shortage of microchips!

An essential part of modern vehicles, an average vehicle will contain anything from one to two hundred chips. Advanced, hybrid cars that contain cutting-edge tech and benefit from enhanced connectivity will incorporate thousands of micro-processing chips, controlling everything from lane-assist features through to braking. Supply problems mean that major automotive manufacturers such as Toyota, Nissan, and General Motors have all had to slow production of new vehicles. In response to the shortage, Hyundai, for example, has had to temporarily close one of its factories.

What's caused the shortage?

Commentators suggest that the shortage is caused by a number of factors, including climatic factors, the effects of the pandemic, and the way in which the chips are made. During the early months of the pandemic, demand for micro-chips from car manufacturers dropped, as demand tailed off. At the same time, demand from electronics manufacturers rose, as the demand for virtual communication via laptops, phones, and similar, rose. Even when demand is high, vehicle micro-chips account for less than 10% of the microchip market. Micro-chip manufacturers are already selling all their chips elsewhere; there is little incentive to prioritise the automotive industry.

The micro-chip processing sector is a relatively small one, despite the importance of chips in modern technology. The creation of a microchip requires a vast amount of water (more than 8000 litres). A drought in Taiwan (home of the largest chip manufacturer, TSMC), has meant there is insufficient water for the factory to operate at full capacity. The recent cold snap in Texas, US, which led to power failures, meant Samsung's Austin chip plant had to be temporarily shut, and Japanese manufacturer, Renesas, suffered a devastating fire, which has halted production for a few weeks.

What are the implications for Australia?

Despite the current micro-chip supply issues, it is suggested that chip supplies will stabilise towards the end of the year. Motorists wishing to purchase a new car in 2021 will still be able to, albeit a few months later than planned, in some cases.

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