News Release

For Auto Makers, the Chip Famine Will Persist

For Auto Makers, the Chip Famine Will Persist

Pandemic lockdowns, a drought and a winter storm have broken links in the supply chain

September 22, 2021

By Daniel Yergin and Matteo Fini
Wall Street Journal

Excerpt and link to the full article follows

The chip famine is starving the global auto industry and putting car buyers on a strict diet. So far this year, seven million cars that were supposed to be produced haven’t been, according to IHS Markit data. Auto companies are shutting down production lines for weeks at a time and furloughing employees as a result of the chip shortage. Toyota has slashed its production 40% in September.

All this is hitting consumers. Car dealers’ lots across the U.S. are sparse. The inventory of new cars in the U.S. is only about 30% of pre-pandemic levels, and buyers snap up used cars as soon as they find them. The shortage doesn’t end there. Rental companies reduced their inventories during the pandemic and now don’t have enough cars to meet demand. So if you’re renting, it will cost you more than expected—if one is even available.

The chip famine won’t be solved quickly. The automotive team at IHS Markit calculates that semiconductor supply won’t catch up with industry demand until late 2022, and shortfalls of some advanced-function chips will likely persist into 2023.

New cars increasingly are becoming computers on wheels, needing typically more than 1,000 computer chips for basic functions like raising and lowering windows or adjusting air conditioning and complex features like digital displays and adaptive cruise control. Mostly, cars don’t need the advanced and expensive chips like those used in the latest smartphones. Instead, they use mass-produced microcontrollers. Over the past decade, fewer companies have produced these chips….

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