How to stay ahead of the semiconductor shortage
A global shortage of the semiconductor chips used in new vehicles is causing widespread disruption to car and van deliveries. Here are some simple steps to keep your orders on track.
Why is there a shortage of semiconductors?
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:
1. Changing Demand
The automotive industry temporarily reduced its semiconductor orders as showrooms and factories were shuttered last Spring1, 2. By the time vehicle production was getting back up to speed, suppliers had diverted to laptops and consumer electronics for home-bound consumers.
2. Reduced Supply
Semiconductor manufacturers re-started production with reduced staff levels and social distancing at factories, so were not operating at full capacity3.
3. Unexpected Challenges
NXP4 and Infineon Technologies5 – 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.
How is the semiconductor shortage affecting vehicle supply?
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.
Longer lead times
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.
What can I do to avoid disrupted vehicle deliveries?
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:
Identify which vehicles are due for replacement in the next 12 months and begin the procurement process ahead of your normal schedule.
Keep it Simple
Where appropriate, ordering vehicles from stock can avoid delays in delivery.
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?
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.
1 Hausler, S et al. (2020). The new normal: Impact of COVID-19 on mobility solutions | McKinsey. online Available at: https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/the-impact-of-covid-19-on-future-mobility-solutions Accessed 28 May 2021.
2 Anon. (2000). Passenger car registrations: -41.5% five months into 2020; -52.3% in May | ACEA – European Automobile Manufacturers’ Association. online Available at: https://www.acea.be/press-releases/article/passenger-car-registrations-41.5-five-months-into-2020-52.3-in-may Accessed 12 Apr. 2021.
3 Bauer, H, et al. (2020). How COVID-19 will affect semiconductor demand in 2021 | McKinsey. online Available at: https://www.mckinsey.com/industries/advanced-electronics/our-insights/how-the-semiconductor-industry-can-emerge-stronger-after-the-covid-19-crisis Accessed 28 May 2021.
4 Anon. (2021). NXP Resumes Operations at Austin, Texas Facilities Following Weather-Related Shutdown and Provides Revenue Update | NXP Semiconductors – Newsroom. online Available at: https://media.nxp.com/news-releases/news-release-details/nxp-resumes-operations-austin-texas-facilities-following-weather Accessed 28 May 2021.
5 Anon. (2021). Infineon re-ramps production in Austin, Texas, and provides update on customer impact; pre-shutdown output level expected in June 2021 – Infineon Technologies. online www.infineon.com. Available at: https://www.infineon.com/cms/en/about-infineon/press/press-releases/2021/INFXX202103-054.html Accessed 28 May 2021.
6 Wu, D & Wang, C (2021). Taiwan Cuts Water Supply for Chipmakers as Drought Threatens to Dry Up Reserves online Available at: https://www.bloomberg.com/news/articles/2021-03-24/taiwan-raises-red-alert-over-water-cuts-supply-for-chipmakers Accessed 28 May 2021.
7 Anon. (2021). Gartner Says Global Chip Shortage Expected to Persist Until Second Quarter of 2022. online Available at: https://www.gartner.com/en/newsroom/press-releases/2021-05-12-gartner-says-global-chip-shortage-expected-to-persist-until-second-quarter-of-2022 Accessed 28 May 2021.
8 Roberts, G (2021). The chips are down, and it’s playing havoc with vehicle supplies. online Available at: https://cdn.fleetnews.co.uk/web/1/digital-issue-categories/may-2021/FN-mag-May_2021/index.html#page=9 Accessed 28 May 2021.