Wall Street Journal: Chip Shortage Could Cost Industry $210 Billion in Revenue
Every time it looks like the automotive industry is going to recover from the semiconductor chip shortage, another roadblock pops up. These days, it isn’t just the supply chain having issues. Factories don’t have enough people to work, and there aren’t enough supplies to keep up with demand anyway. The Wall Street Journal suggested that the crisis forces automakers to adapt, so how exactly are these companies acclimating?
The Wall Street Journal on the chip shortage so far
Earlier in the year, experts predicted the semiconductor chip shortage would be over by now. Once people could get back to work, the chips would be flowing once again. But that never happened. According to a recent article by The Wall Street Journal, September was another hard month for the automotive industry. Large brands like Toyota and GM announced further reductions of fall production schedules due to a lack of supplies and workers.
In May, CNBC reported that Consulting firm AlixPartner estimated the chip shortage would cost the industry about $110 billion in revenue. This week, AlixPartners said the estimate would be at least $210 billion in lost revenue. Almost double the initial estimate from just five months ago.
Automakers are aiming to avoid another incident with this, particularly with the semiconductor chips. As it stands now, the next wave of technology and vehicles require even more chips than current cars. It seems that instead of having a sort of “middle man” for chips, the big automakers are forging relationships directly with semiconductor chip companies.
The Wall Street Journal says automakers are trying to adjust to the chip shortage
Wall Street Journal suggests that in time, this could be similar to the revolution batteries are going through now. Just recently, Ford invested $50 million in electric vehicle battery recycling. Many more prominent companies are focused on making batteries in-house to lower the cost and make the supply-chain problems less of an issue.
“In time, the relationship between chip and car makers will get even closer. As vehicles increasingly resemble rolling computers, semiconductors could become a strategic battleground—a bit like batteries are today.”Wall Street Journal
Right now, vehicles require hundreds to upwards of 1,000 semiconductor chips per vehicle. These chips are necessary pieces for things like the ignition, brakes, seats, radios, and everything in between. At the start of the pandemic, these chips were diverted to be used in electronics and other in-demand items. Thus, automakers have been trying to modify or lose features that require too many chips.
Some less popular vehicles have been sacrificed
The Wall Street Journal says that some big brands like Stellantis have been producing vehicles without blind-spot detection. Trucks like the Chevy Silverado were built without software that helps manage and keep track of the fuel. Tesla made the news when the brand removed lumbar support from passenger seats of the EV.
Companies have been forced to pick better-selling vehicles and drop those with lower numbers to divert chips to money-makers. Brands are prioritizing more popular cars to save the brand in the bigger picture. One instance Wall Street Journal mentions is the Chevy Malibu. Chevy cut the Malibu production to use chips in the Tahoe, a more popular SUV.
Even with all of these tips and tricks, there is no guarantee that automakers will keep up with production. For now, it seems everyone is adapting as quickly as possible. There is no clear end in sight at this point, but hopefully, the chip shortage starts to trend down as we move through the rest of the year.