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How Did Semiconductor Chip Shortage Affect The Auto Industry?

By Daisy Emah-Emah Posted: 02/24/2022

If you’ve ever been in a physics class you’ve probably heard of a semiconductor. If you’ve never heard of it, let’s break it down.

 

A semiconductor in simple terms controls electric current.

 

 

It is a material that lies between a conductor (conducts electricity) and an insulator (does not conduct electricity). It has a lot of properties like moving current from one direction to the other with ease. And is used in different industries to manufacture various electronic devices. 

 

In the automobile industry, a semiconductor is responsible for the advancing vehicle to evolve into intelligent systems on wheels. 

 

Semiconductor Usage in Vehicles

1. Vehicle Electrification

It is possible to replace your vehicle’s mechanical system with an electric system because of semiconductors. This has led to the revolutionary invention of electric vehicles and the possibility of creating longer battery life has increased. 

 

Electric vehicles have fewer emissions and are better for the environment and semiconductors played a big role in this. Also, there is an increase in vehicle efficiency and less dependency on gas.

 

2. Connectivity

Newer models of vehicles come with improved technologies with infotainment and telematics ability making them computer on wheels. Vehicles are becoming more sophisticated and this is attributed to semiconductors. Now your vehicle can scan your environment and alert you.  

 

3. Driving Assistance

Semiconductor makes it possible for your vehicle to perform functions like lane change assist, adaptive cruise control, and other driver-assist systems. This helps the driver stay safe while driving and sometimes are activated when the driver needs them the most. 

 

4. Vehicle Safety

Intelligent functions like blind-spot monitoring, parking assist, backup camera, etc, help the driver maintain utmost safety while driving. This is revolutionary in reducing road accidents and ensuring safety. Semiconductors made this possible. 

 

 

What Caused Semiconductor Shortage?

So how did semiconductor shortage become a global issue – well COVID-19 happened!

 

Asia is the first part of the world that got hit hard by the pandemic. Asia is the largest manufacturer of semiconductors. Due to the lockdown factories had to shut down even though the demand for semiconductors didn’t dwindle. 

 

There was a higher demand for semiconductors for certain products.  Manufacturers had to shift base to fulfill those demands. Because of the complexity of semiconductors, it takes longer periods to manufacture. This created a vacuum as the demand outweighed the supply.   

 

Since after the lockdown, there is still the struggle of recovery. There is still not enough capacity to produce more chips to meet the demand. Factories aren’t also being built fast enough to fill the vacuum – the complexity is just too much. 

 

 

What is The Impact of Semiconductor Shortage on The Auto Industry?

Many automakers had to take the hard road and prioritize using semiconductors in their profitable vehicles. Some plants were left idle and some had to shut down because of the shortage.  

 

Automakers had to get creative to stay afloat. They sent vehicles to dealers while they waited for chips and other parts. They also shipped out vehicles without some features like wireless charging just to save chips for important components.  

 

 

Necessity truly is the mother of inventions – because automakers began working to cut down the number of chips needed for each part of the vehicle. 

 

The shortage affected auto customers as buying vehicles became very difficult. Customers waited for months before their orders were fulfilled due to low inventory. There were fewer trade-ins for used cars which skyrocketed the price making it difficult for customers to afford. 

 

 

How Can I Get My Car in The Midst of All This?

Think – wholesale auctions!

 

Wholesale auctions offer a wide inventory of used vehicles which are much cheaper than dealerships. Many dealerships stock up their inventory from wholesale auctions – you can be sure to save thousands.

 

A major advantage of a wholesale auction is that you get your vehicle at wholesale price, caving on dealerships’ profits. You are able to avoid negotiating with a dealer and save thousands on your purchase.

 

If you’re patient you may find a diamond in the lot at an affordable price and a variety of vehicles to choose from. When purchasing a used vehicle, it is advisable to check the vehicle’s history report. The report contains the owner’s data, odometer reading, registration history, repairs.

 

 

Further Reading

  1. Buying the Best Used Honda Car for Sale 
  2. How to Choose the Right Used Hyundai for Sale 
  3. Used Ford Car for Sale: How to Choose the Right One 
  4. Best Used Cars You Can Buy This Year Under $10,000

 

Conclusion

The auto industry needs semiconductors – even though many manufacturers have been looking for ways to cut down usage in certain components. A semiconductor is used in the advancement of other technologies like the electric vehicle. 

 

The world has seen that expansion is needed for chip production. But building more factories cannot be done fast enough, leaving the vacuum to be felt.

 

The good news is that the situation is improving though not as fast as wanted – but improving nevertheless. There could be setbacks in the near future but measures are being put in place to tackle them. 

 

The auto industry keeps evolving – and we are expectant of what the future holds. 

 

Are you looking to buy from a wholesale auction, we’ve got you covered! Auto Auction Mall has an inventory of over 200k vehicles. To get started, sign up for free on our website and begin biding – No license required! Our representatives are happy to guide you through the entire process.

 

Sign up here to get started!

 

Sources: AZO Materials, Motortrend

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