Solving The Global Microchip Shortage

Amid numerous costly setbacks in the global microchip supply chain, it would seem that the US auto industry will take a little while longer to bounce back from the hit it took last year. Steps like the proposed federal infrastructure bill have been made to ease things along, with that particular bill slated to invest $50 billion to the domestic chip industry, according to Semiconductors.org. But redoubling manufacturing efforts is going to take time, and automakers are still expecting hefty losses. All the while, demand for vehicles is rising due to numerous factors, such as the increasing importance of logistics and supply chain services.

Auto and semiconductor groups partner up for stability

Aside from the proposed bill, semiconductor trade groups have entered into partnerships with automakers to improve the chip supply chain and mitigate losses for both parties. One such group is SEMI, who signed a memorandum of understanding with the Center for Automotive Research to foster stronger connections between their industries. This move, on top of SEMI’s Smart Mobility Initiative, is expected to make it easier for automakers to access the tech, talent, and research they need to sustain growth and demand. Both industries stand to profit by this development, and insulate them from most of the losses caused by the ongoing chip shortage.  

SEMI places high hopes on Smart Mobility Initiative Ecosystem  

SEMI terms its Smart Mobility Initiative as an “ecosystem.” This is wherein carmakers and electronics manufacturers can engage in the free exchange of products and information. Reinforced by their new and improved partnership with automakers, the SMI ecosystem can minimize car production inefficiencies in this time of scarcity. Indeed, despite  the industry recovering exceptionally in April, car prices soon shot up due to low supply. So high, in fact, that it was attributed to the US Consumer Price Index reaching a 13-year high in May. Hence, the president of the Center for Automotive Research, Carla Bailo, considers this a timely development.  According to Bailo, the auto industry will need a much larger supply of semiconductors from here on out. It is the hope of both groups that their strengthened alliance will eventually alleviate the all-time high prices, but we have yet to see its effects. As things stand, prospective car buyers are advised to keep an eye on local car listings and wait for the price hike to subside. How long before car prices return to normalcy remains to be seen.

Modern auto industry essentially hinges on better chip production 

This chip shortage could not have come at a more inopportune time. The auto industry was experiencing an impressive boom because of pent-up demand. But the growth rebound was halted in its tracks because of insufficient supply. Especially now that electric cars, vehicles that are even more reliant on electronics, are taking a larger share of the total demand. The success of the proposed federal infrastructure bill can very well be the pivotal component in ensuring that the US auto industry, and indeed the country’s economy as a whole, can make a full recovery.

The auto industry is no stranger to rocky episodes such as this one. But this is perhaps unlike anything it had ever seen due to how tech-centered it is. Fortunately, the industry can look back on the knowledge gained from the challenges of the past to surmount the one posed by the brave new world of the 2020s.

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Christophe Rude

Christophe Rude

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