With almost all vehicles implementing several “hike waves”, car prices have substantially risen over the past few months. The worst part, however, is the fact that the future too, isn’t that great for prices. Inflation in input costs followed by a shortage of crucial components such as semiconductors, continue to haunt potential consumers, as all leading manufacturers are expected to continue the trend of price hikes. And if you are wondering what is this shortage of semiconductors, then here’s everything about it.
What is a Semiconductor?
Often dubbed as microchips or integrated circuits, semiconductors are materials (generally solid chemical components) that conduct electricity. The thing that makes it unique is the fact that a semiconductor has the ability to conduct electricity under specific circumstances as well. This is because the conductivity of a semiconductor lies between that of an insulator and a conductor. This is what makes semiconductors an ideal material for controlling electrical current.
Generally, most semiconductors are comprised of materials such as silicon, germanium, gallium arsenide etc. Used in almost all key electronic components such as mobiles, TVs, cameras, transistors etc., even automobiles are highly dependent on semiconductors.
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Why do manufacturers need a semiconductor?
On-board a vehicle, semiconductors play a central role in almost everything related to vehicle electrification such as the creation of electronic vehicles, driver assistance systems, infotainments, safety equipment, comfort features etc. In fact, it wouldn’t be wrong to say that semiconductors are the bedrock of all futuristic advancements in the automobile industry.
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The Shortage
There is no surprise that the automotive industry is running out of “chips”. The global semiconductor shortage that began back in the first quarter of 2021 continues to produce halted assembly lines, haunting the production of passenger vehicles, leading to almost all OEMs option for an increase in prices to cover up the losses.
It all started back in 2020 when the COVID pandemic engulfed the entire world. As a result, the auto industry saw a substantial drop in demand. Even though demand increased in the second half of the year, automakers didn’t meaningfully increase their semiconductor orders. Simultaneously, due to the pandemic, the work from home culture significantly rose, leading to a huge demand for laptops, routers, computers and other communication equipment that heavily rely on semiconductors.
The result was clear, by the time the auto industry plunged back, the demand for semiconductors was so high that a global shortage was imminent, with a majority of conductors reaching out to other industries, leaving the automotive sector dry.
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The Bottom Line
With semiconductor shortage still a solid reality, there’s only a little hope. Due to the sheer demand for semiconductors, balancing demand, production and supply will take quite a lot of time. As per the current scenario, automakers are expected to implement continuous hike waves, possibly till 2022.
So this was all about the semiconductor shortage. Stay pinned to the GoMechanic Blog for everything automotive.
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