What’s Up With the Current Global Shortage of Semiconductor Chips?

Semiconductors fuel the modern world. From mobile phones to machines, everything is dependent on semiconductor chips today.

And this dependency is on a whole different level for the auto industry. The shortage of these semiconductor chips has brought the production of Audi, Mazda, General Motors, and other giants to a halt.

So, what is this fuss all about? Before we delve deeper, let’s brush up on the basics first.

What Are Semiconductors?

Semiconductors are materials like silicon that conduct electricity. The material’s conductivity must fall between that of the conductor, like copper, and the insulator, like glass. These semiconductors are used in the form of microchips to produce a range of electronic devices.

For example, in the auto industry, they’re found in everything from brake sensors to power steering and parking cameras. Basically, every essential aspect of a modern car relies on semiconductor chips to function properly.

Let’s look at it by the numbers for a better perspective. Now’s your chance to look away and guess how many semiconductor chips are in a car. Don’t worry, we’ll wait. We’re ready when you are.

The answer varies depending on what kind of car you drive. Modern petrol or diesel cars have around 1,300 semiconductor chips throughout their many parts. And an electric vehicle more than doubles that number, coming in at approximately 3,500 semiconductor chips. That’s between 1,300 and 3,500 semiconductor chips per car!

So, Why the Shortage?

As you now know, semiconductor chips basically run the modern world. And their supply shortage has wreaked havoc. The demand for these sophisticated chips spiked high during the pandemic. Consumers worldwide were stuck at home and in dire need of laptops, gaming consoles, smartphones, and TVs for entertainment and working purposes.

However, the world was paused, and carmakers slashed orders for these precious chips due to the reduced demand. To cope up with the change and keep paying their employees, chipmakers then diverted their supply to the consumer technology space.

Fast-forward a few months, and lockdowns started getting uplifted in various parts of the world. Now automakers were increasing their demand for semiconductor chips, but the damage was already done. According to the experts, the demand for chips in the later months of the year spiked in equal numbers to the reduced demand earlier that year. And this created the current imbalance.

Actually, the chaos is growing. Most car factories are now working on a “just-in-time model.” This means that instead of maintaining inventories of critical components that they need for future orders, they’re ordering as needed. Even with this change, chipmakers are finding it tough to meet the rising demand. And so carmakers are left with no choice but to shut down their production lines.

Semiconductor factories are increasing their production in response to the renewed demand, but the results will not be instant. Chips are an intricate component and can take up to 26 weeks to produce. Plus, global economics and politics have a lot of say in the development process as well.

We hope that this shortage of semiconductor chips gets dealt with quickly so that we can see more innovation in electric vehicles. What about you? Do you think carmakers could have handled the whole situation better? Let us know in the comments below.

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