The global supply of semiconductor chips has been reduced, which has had a significant impact on the automobile sector, among other industries,
As a result of the pandemic-related closure of chip-making businesses and factories, the supply of these materials, which are the building blocks of modern technology and vehicles, has decreased significantly.
South Korea, China, and Taiwan are home to the majority of the world’s semiconductor producers. With the onset of the epidemic, there has been a significant surge in the demand for technological products.
Due to the shutdown of factories and industries, semiconductor chips are required for these gadgets, and the manufacturing of these chips has been disrupted by the epidemic, just as it has been in every other market area.
As a result, there is a severe scarcity of semiconductor chips for the vehicle industry, which has been battling with a lack of supplies for quite some time.
Due to the rising demand for these chips, industry leaders and economists have expressed their concern about the possibility of a shortage hurting the smartphone industry and the manufacturing volumes of the devices.
Global chip shortage: What is the impact on the smartphone and automobile industries?
With the start of the Covid-19 epidemic, automobile manufacturers stopped down or reduced their production, anticipating a decrease in automobile sales.
As a result of the epidemic, more individuals are opting to drive their own cars rather than use public transportation to go about. The semiconductor chip is a critical component in the manufacture of automobiles and other vehicles.
The problem here, however, is that automobiles do not rely solely on a single type of semiconductor for operation. According to Carguides, they require both the most recent versions of components like infotainment systems and less-advanced versions of components such as power windows.
As a result of an increase in the number of work from home instances, the demand for electronic appliances has increased, resulting in an exponential growth in the need for semiconductor chip production.
Because demand for semiconductor chips has outstripped supply in recent years, the car and smartphone industries are now experiencing shortages of semiconductor chips.
Demand for semiconductor products has grown by 6.5 per cent in 2020 alone, according to the Semiconductor Industry Association.
Following that, the smartphone market will be impacted.
According to economist Iris Pang of ING Greater China, while the automobile sector has been hit hard by a severe semiconductor shortage this year as a result of Taiwan’s inability to satisfy demand, China is resuming its manufacturing, which will relieve the strain on Taiwan, according to Pang.
Pang, who spoke at the Reuters Global Markets Forum, also stated that Taiwanese semiconductor businesses have increased manufacturing in China as a result of Covid limitations, which have caused factory output and port operations in Taiwan to be affected.
Using GDP as a measure, “China gained 5 per cent as a result of the chip shortage — Taiwan semiconductor businesses planned well and established huge plants in mainland China,” said Pang.
She also claimed that, because Taiwanese semiconductor makers are now focusing primarily on the car industry, the chip shortage for the sector may be resolved in a matter of weeks. This, in turn, would increase the amount of pressure placed on the smartphone manufacturing industry.
The overall supply bottleneck, according to Adam Khan, founder of AKHAN Semiconductor, is expected to persist until the second quarter of 2022. However, Khan acknowledged this timetable is only “aspirational.”