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Global semiconductor shortage slows production in automotive industry

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The pandemic has forced people to work from home and their children have started to learn remotely alongside them.

Remote workers have started to upgrade their devices, which has resulted in increased demand for laptops, phones, bluetooth accessories, and many other electronic devices.

All of these devices require semiconductors to function because they function like the brains of electronics.

SIU Associate Professor of Operations Management Greg DeYong says the auto industry is struggling to produce vehicles due to the global semiconductor shortage.

“Unfortunately, what really happened at the start was during the initial Covid shutdowns that automakers halted production and canceled a lot of their semiconductor chip orders. had to stop making these chips for a while. “

Canceled orders were quickly replaced by semiconductor orders for other electronic devices.

DeYong says it can take up to seven months to manufacture semiconductors from start to finish.

“Once they got into the semiconductor chip industry again, they couldn’t catch up because suddenly the orders all came back and there was no way to catch up. . “

Jesse Edwards, sales manager for Watermark Ford and Hyundai, said before COVID-19 they typically had over 200 new cars in stock, but now …

“We run anywhere between 10 and 20 percent of that. Lately we’ve had around 25-35 new cars at one point.

Edwards says that with lower inventory, manufacturers are rethinking the way they produce vehicles and the options they offer.

“The more equipment you want, the more wrestling there is, the bigger the struggle, I guess you could say, but at the same time, manufacturers are smart in analyzing customer demand, so they don’t build us much. of the cars that people don’t want them to focus on, you know, what has a quick turn, what sells out fast, what the market is actually asking for and therefore they are putting their resources into it.

While the auto industry waits for the supply chain to deliver the products, so do car buyers.

“Once upon a time, there was eight to ten weeks. We saw three to six months. There are some stresses with materials other than chips, even though chips are the primary focus. “

DeYong says several industries have taken note of this global shortage and changed their approach to selling products.

“They’re also doing the same thing as Apple, which is moving towards their higher profit margin products, so you’ll see a much better SUV offering than you will see cheap small cars, because that’s where it is. Money is fair now, but they really leave features out of cars because they don’t have the chips to support them now.

The semiconductor industry has had its own issues to tackle, and Edwards says it’s had a big impact on the supply chain.

“The factories where these chips are produced have fallen victim to Covid outbreaks for further shutdowns, fire damage, some are produced in Texas, and you know, snowstorms are wiping them out for a little while. “

DeYong says the impact has been huge due to the number of manufacturers around the world.

“You know, this is one of those things where the industry kind of consolidated itself for a while and we didn’t really notice. And so all of a sudden we woke up one day and thought, wow, there’s only one US manufacturer that makes chips, that’s Intel. And there are only a few left in the world now where there were dozens of chipmakers.

Analysts predict the supply chain is expected to catch up within the next two years.

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