How the global semiconductor shortage is affecting vehicle deliveries

5 min to readFleet management
As demand for new vehicles begins to recover, a worldwide shortfall in the vital components needed to build them is likely to disrupt deliveries for most of 2021. Here’s what you need to know.
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What is a semiconductor, and how do cars and vans use them?

Semiconductors are the foundation of the memory and processor chips found in almost every electronic device, and the global market is increasing rapidly. According to the Semiconductor Industry Association (SIA), global sales reached $439bn (£318bn) in 2020 [1], which means it has more than doubled in value during the last 20 years [2].

The automotive industry relies on semiconductors, as an enabler of some of the biggest trends in new vehicles. Connected infotainment systems, sensors for safety and assistance functions, and power electronics for electric and hybrid drivetrains all require them. According to Deloitte, electronics will account for half of the cost of a new vehicle by 2030 [3]. Semiconductors alone are projected to reach $600 (£436) per vehicle by that point, compared to was $312 (£227) in 2013.

Why is there a global shortage of semiconductors?

The onset of the Covid-19 pandemic caused a perfect storm for the automotive industry. At its peak, restrictions to control the virus halted production at 90% of vehicle and component factories in China, North America and Europe [4]. Alongside showroom closures, European registrations almost halved during the first six months of the year [5].

In turn, carmakers heavily reduced purchasing of semiconductors, just as demand surged for home computing, gaming and healthcare products. When semiconductor manufacturers restarted at reduced production, the limited volume available had already been prioritised elsewhere [6], leading to supply constraints as automotive markets picked up in the third quarter of the year [7]. Demand for semiconductor-reliant technology is increasing, but supply is struggling to keep up.

Exacerbating the issue, only five semiconductor manufacturers supply the automotive industry and two of them - NXP [8] and Infineon Technologies [9] - had to suspend production at their facilities in Texas during winter storms in February. There are no quick fixes, either - the SIA claims up to a 26-week lead time for semiconductor factories to deliver the orders to customers [10].

How will a shortage of semiconductors affect vehicle deliveries?

The automotive supply chain is tiered, and semiconductors are a component within a subsystem of the vehicle - such as a display, an infotainment system or a sensor. At best, a shortage could cause some trim levels or optional equipment to become unavailable. At worst it could stall production of an entire model line. It's a particular challenge for an industry which tends not to hold much inventory.

AutoForecast Solutions is projecting semiconductor shortages will reduce vehicle production by 202,000 units during 2021, and a quarter of that lost volume will be in Europe [11]. European industry association ACEA expects supply constraints to remain until the third quarter of 2021, resulting in "considerably lower" production volumes and postponed deliveries for the rest of the year [12]. This is also happening as social distancing measures affect staffing at factories throughout the supply chain.

Manufacturer forecasts differ. Ford is expecting a 10-20% decrease in first-quarter production [13], while Volkswagen says it affects vehicles on the MQB platform [14] which is widely used across its model range. Nissan [15] and Honda [16] have paused production in the UK citing supply challenges, while Daimler [17] is cautiously projecting it can make up for lost volume in Q1 through the rest of the year.

A notable outlier, Toyota secured several months of semiconductor volume in advance, and is confident that production won't be affected [18].

What can I do to minimise delays?

The semiconductor market remains fluid, affected by global demand and shifting trends in consumer electronics [19]. In the meantime, fleet professionals should consider the following:


[1] Ravi, S. (2021). Global Semiconductor Sales Increase 6.5% to $439 billion in 2020. [online] Semiconductor Industry Association. Available at: https://www.semiconductors.org/global-semiconductor-sales-increase-6-5-to-439-billion-in-2020/ [Accessed 12 Apr. 2021].

[2] Anon. (2001). Global Semiconductor Market Tops $200B In 2000, SIA Says - EDN. [online] EDN. Available at: https://www.edn.com/global-semiconductor-market-tops-200b-in-2000-sia-says/ [Accessed 12 Apr. 2021].

[3] Semiconductors -the Next Wave Opportunities and winning strategies for semiconductor companies. (2019). [online] . Available at: https://www2.deloitte.com/content/dam/Deloitte/tw/Documents/technology-media-telecommunications/tw-semiconductor-report-EN.pdf [Accessed 12 Apr. 2021].

[4] 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 12 Apr. 2021].

[5] 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].

[6] Ravi, S. (2021). Semiconductor Shortage Highlights Need to Strengthen U.S. Chip Manufacturing, Research. [online] Semiconductor Industry Association. Available at: https://www.semiconductors.org/semiconductor-shortage-highlights-need-to-strengthen-u-s-chip-manufacturing-research/ [Accessed 12 Apr. 2021].

[7] Anon. (2020). Passenger car registrations: -23.7% in 2020, -3.3% in December | ACEA - European Automobile Manufacturers' Association. [online] Available at: https://www.acea.be/press-releases/article/passenger-car-registrations-23.7-in-2020-3.3-in-december [Accessed 12 Apr. 2021].

[8] 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 12 Apr. 2021].

[9] 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 12 Apr. 2021].

[10] Yinung, F. (2021). Chipmakers Are Ramping Up Production to Address Semiconductor Shortage. Here's Why that Takes Time. [online] Semiconductor Industry Association. Available at: https://www.semiconductors.org/chipmakers-are-ramping-up-production-to-address-semiconductor-shortage-heres-why-that-takes-time/ [Accessed 12 Apr. 2021].

[11] Anon. (2021). AFS-Alerts: Semiconductor Shortage Impact on Global Automotive Production. [online] Available at: https://www.autoforecastsolutions.com/covid19 [Accessed 12 Apr. 2021].

[12] Anon. (2021). Semiconductors shortage: ACEA letter to Commissioner Breton | ACEA - European Automobile Manufacturers' Association. [online] Available at: https://www.acea.be/news/article/semiconductors-shortage-acea-letter-to-commissioner-breton [Accessed 12 Apr. 2021].

[13] Ford Motor Company. (2021). Q4 2020Earnings Transcript. [online] Available at: https://s23.q4cdn.com/799033206/files/doc_financials/2020/q4/Ford-4Q2020-Earnings-Transcript.pdf [Accessed 12 Apr. 2021].

[14] Anon. (2021). Volkswagen Group has to adjust production. [online] Available at: https://www.volkswagenag.com/en/news/2020/12/Rapid-recovery-of-automobile-markets-leads-to-semiconductor-bottleneck-Volkswagen-Group-has-to-adjust-production.html [Accessed 12 Apr. 2021].

[15]. BBC News. (2021). Nissan: Hundreds furloughed over parts shortage. [online] 24 Feb. Available at: https://www.bbc.co.uk/news/uk-england-tyne-56184866 [Accessed 12 Apr. 2021].

[16] Allan, L. (2021). Honda halts Swindon production for third time due to parts delays. [online] Available at: https://www.autocar.co.uk/car-news/industry-news/honda-halts-swindon-production-third-time-due-parts-delays [Accessed 12 Apr. 2021].

[17] Anon. (2021). Daimler confident for 2021. [online] Available at: https://media.daimler.com/marsMediaSite/ko/en/48994398 [Accessed 12 Apr. 2021].

[18] Anon. (2021). TOYOTA NEWS #116?An Upward Revision Based on Doing 'What We Should Do' (Toyota 3rd-quarter Financial Results). [online] TOYOTA TIMES. Available at: https://toyotatimes.jp/en/insidetoyota/116.html [Accessed 12 Apr. 2021].

[19] 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 12 Apr. 2021].

Published at 19 May 2021
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19 May 2021
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