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Current Affairs

Global chipset shortage

Date: 09 February 2021 Tags: IT, Mobile & Computers

Issue

A global chipset shortage has created panic among the world’s leading automakers, so much so that the companies have been forced to either halt or slow vehicle production.

 

Background

If the ongoing global semiconductor shortage will continue for a few more months, it will hit the carmakers who are already under pressure from regulators to pump more resources into electric vehicles.

 

Details

  • All top carmakers from Toyota to Volkswagen, Daimler, and GM are reeling from this global shortage of semiconductors. 

  • Like a smartphone, a modern car also uses semiconductors. Analysis suggests that electronics make for 40 percent of a new car’s total cost. 

  • Over the past few years, automakers have increasingly become dependent on semiconductors and electronic components.

  • More cars now have a power steering, tablet-like display, Wi-Fi connectivity and cellular connectivity.

  • A delay in getting the chips will halt production lines and automakers can’t keep up with a boom in demand.

 

Why shortage?

  • Silicon chips are the backbone of the consumer electronics industry. Demand for these sophisticated chips have soared during the pandemic, as consumers bought up laptops, next-gen game consoles like the PlayStation 5 and Xbox Series X, smartphones, and TVs.

  • When the Covid-19 was its peak, carmakers slashed orders for the chip due to lower than expected sales.

  • At the same time, chipmakers started diverting attention to meet the growing demand for chips used in the consumer technology space.

  • Experts have blame automakers and their lack of farsightedness and poor planning for the current situation.

  • Global carmakers have been badly affected by the aftermaths of the Covid-19 pandemics, but this continuing critical shortage of semiconductors could potentially derail the chances of them recovering fast.