How to stay ahead of the semiconductor shortage

Semiconductors are the foundation for the processing and memory chips used in almost every form of consumer technology, and they’ve become increasingly common in cars and vans. An important component of everything from infotainment systems to powertrain controls and sensors for driver assistance features, they’re a vital component and – for the near future – they’re also in short supply.

The semiconductor industry has faced a perfect storm since the start of 2020:

The automotive industry temporarily reduced its semiconductor orders as showrooms and factories were shuttered last Spring^1, 2^. By the time vehicle production was getting back up to speed, suppliers had diverted to laptops and consumer electronics for home-bound consumers.

Semiconductor manufacturers re-started production with reduced staff levels and social distancing at factories, so were not operating at full capacity³.

NXP⁴ and Infineon Technologies^5 ^– two of only five companies producing chips for vehicles – had to suspend manufacturing at plants in Texas during storms in February. A fire at one of Japan’s largest semiconductor factories in March, and Taiwan’s worst draught in decades⁶ affecting the water-intensive production process required, have put further pressure on supply.

More information is available here.

Semiconductors are usually several tiers down the automotive supply chain from vehicle manufacturers, so the full effects of the global shortage are still emerging. However, with a six-month lead time to bring new production facilities online, it’s expected that disruption will continue for the rest of this year and persist into 2022⁷.

The impact varies by manufacturer and model, depending on their suppliers. At best, semiconductor shortages could result in some standard or optional equipment becoming temporarily unavailable. However, it could also cause certain trim levels or even models to be discontinued for the short term, or production to be suspended at factories.

For the near future, it’s worth expecting longer lead times – the Association of Fleet Professionals⁸ told Fleet News its members were claiming six to nine months as the industry norm for cars and light commercial vehicles. That’s two or three times longer than fleets are used to working with.

LeasePlan is expecting a steady supply of new vehicles throughout 2021, and manufacturers are taking steps to fulfil demand. However, it’s important to factor potential disruption into your procurement process – here’s how:

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  Plan Ahead

  Identify which vehicles are due for replacement in the next 12 months and begin the procurement process ahead of your normal schedule.

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  Keep it Simple

  Where appropriate, ordering vehicles from stock can avoid delays in delivery.

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  Consider Alternatives

  Production is likely to prioritise popular variants and plug-in vehicles as manufacturers work towards UK and EU CO2 targets this year. Where direct replacements are not available, does an alternative meet your needs?

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  Short-Term Solutions

  LeasePlan and Europcars cooperation makes it easier for you as a LeasePlan customer to rent a car for a short period. Whether it is a car, van, truck or a minibus, we are ready to help you. Read more.

For more information, please speak to your LeasePlan Account Manager who will be happy to help.