Assignment1: Name: ID:

Kaysarul Anas Apurba 1811257642

EEE452-Summer 2021
Section:06

Impact of Global Crisis of Electronic Chips on the Automotive Industry

Electronic chips, such as semiconductors, are essential in today's society. We need these chips in
everything from our phones to fighter planes, and without them, much of the technology that allows us
to live comfortably in 2021 would be impossible [1].

Due to Covid-19, the automobile industry, which relies on electronic chips for everything from the
mobile computer to engine management and driver assistance systems, is still the most impacted. [2]
Semiconductors are used to power our electronic gadgets every time we get into a car or do anything
with them. As a result, when the worldwide quantity of these valuable chips begins to drop, it
becomes a bidding war [1].

According to a detailed research by Deloitte, electronics items in any car now cost about 40% of the
vehicle's worth [2]. Automobile designers require semiconductors for those electronics to work
correctly. If the supply of those chips is not regulated precisely, manufacturing will stall, and shops will
be incapable of meeting the requirement of the automobile sector.

All of this may be traced back to the outbreak of the COVID-19 pandemic, which is still occurring.
Chip production was interrupted in the first half of 2020 due to this, which impacted industrial
investment and created erratic supply swings. At the same time, because everyone was staying at
home, overall consumer demand for automobiles fell, pushing chip producers to drive their focus to
non-automotive applications like computer accessories, communications, and data centers, which
saw an increase in demand as more people began working from home [3]. As a result, the automobile
sector sees a drop in revenue.

For example, Toyota representative 'Scott Vazin' stated that it was "absolutely an industry issue. " On
January 11, Toyota was one of the first automobile manufacturers to cease manufacturing. Honda
halted production at its 'Swindon factory' after a few days, and sources claimed that supply difficulties
also afflicted the 'Suzuka' plant and Honda's Fit and Jazz car lines. Ford, Volkswagen, and Jaguar
Land Rover, for example, had to close facilities, lay off people, and cut car output.

Due to chip shortages, several automobile manufacturers have ceased adding high-end features [3].
According to a study filed by businesses like Hertz and Enterprise, carmakers and many automobile
users, such as rental car companies, suffered considerable losses due to short car production since
they were unable to purchase new cars. It has been making a significant profit by purchasing new
automobiles in large quantities and renting them out [2]. As a result, they began purchasing
secondhand vehicles rather than new cars.

If we look at all of the renowned nations for producing a large number of vehicles every year, such as
Japan, Germany, and the United States, we can see that chip shortages have wreaked havoc on their
economies. Although the year is just halfway through, losses due to chip shortages or lower car
production have increased by 33%, totaling about ($110 billion U.S.) for the automotive industry
alone. Many automakers, including those in the United States, are now being forced to temporarily
 Assignment1: Name: ID:
Kaysarul Anas Apurba 1811257642
EEE452-Summer 2021
Section:06

halt, slow down, or delay production due to a severe shortage of sensors and other electrical
equipment. [5]

Faced with the most considerable chop scarcity the world has ever seen, several people have
stepped forward to help, including carmakers and chip companies. However, ramping up this massive
quantity of chip manufacture in such a short period is unfeasible. As a result, they have little choice
except to wait for the situation to be resolved gradually. As a result, they began allowing supply to
progressively but steadily catching up with demand.

On February 24, President Biden signed an executive order (EO14017: America's Supply Chains) to
address the chip shortage and other associated issues. According to the directive, the United States
federal government must perform a 100-day examination of four product supply chains, including
computer chips. [6]

Meantime, in Europe, the European Commission has set a lofty goal of doubling last year's computer
chip manufacturing (10%) by 2030. Our suggested degree of ambition is that by 2030, Europe's
advanced and sustainable semiconductor manufacture, including processors, will account for at least
20% of global output in terms of value. [7]

Only 10% of the world's computer chips will be made in the E.U. by 2020. The E.U. aims to enhance
its digital sovereignty by doubling this ratio to 20% and becoming less reliant on technology that has
long been manufactured within the trade bloc. [7]

References

[1] W. Daniel, "global-chip-shortage-quotes-explain-," [Online]. Available:

https://markets.businessinsider.com/news/stocks/global-chip-shortage-quotes-explain-means-stocks-
semiconductors-national-security-2021-2-1030051469.

[2] L. J. /. N. Kareta, "The global chip shortage explained," 14 April 2021. [Online]. Available: https://www.power-and-
beyond.com/the-global-chip-shortage-explained-a-1015300/. [Accessed 24 July 2021].

[3] D. Welch, "Rental Companies Buy Up Used Cars as Chip Crisis Get Worse," 3 May 2021. [Online]. Available:
https://www.bloomberg.com/news/articles/2021-05-03/rental-companies-buy-up-used-cars-as-microchip-crisis-
gets-worse.

[4] D. Dooley, "$ Sector hardest hit by the global chip shortage," 7 june 2021. [Online]. Available:
https://www.fierceelectronics.com/electronics/4-sectors-hardest-hit-by-global-chip-shortage.

[5] F. Y. Chee, "Europe seeks semiconductor boost, first quantum computer," 9 March 2021. [Online]. Available:
 Assignment1: Name: ID:
Kaysarul Anas Apurba 1811257642
EEE452-Summer 2021
Section:06

https://www.reuters.com/article/ctech-us-eu-tech-idCAKBN2B02D4-OCATC.

[6] S. Shead, "The global chip shortage is starting to have major real-world consequences," 17 may 2021. [Online].
Available: https://www.cnbc.com/2021/05/07/chip-shortage-is-starting-to-have-major-real-world-
consequences.html.

[7] 2021 february 2021. [Online]. Available: https://www.govinfo.gov/content/pkg/FR-2021-03-01/pdf/2021-04280.pdf.