The Semiconductor Shortage Explained: The Auto Industry’s Big Challenge

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The worldwide semiconductor shortage that began in 2021 has continued to be one of the biggest stories in the automotive industry. Automakers have faced slashed production schedules and staggering revenue losses since the shortage of computer chips began. Emerging data has helped experts understand the impact of the chip shortage as well as its causes. Now, as the shortage drags on, many are left wondering when it will end.

The Semiconductor Shortage’s Wide-Reaching Impact

Despite calls for calm from auto industry voices, the chip shortage has been a tremendous obstacle for businesses in many sectors. While the makers of consumer electronics such as smartphones account for the largest share of microchips at about 50%, automakers are the second largest, accounting for around 15% of the supply.

Automakers around the world have certainly felt the impact, with an estimated $210 billion in revenue lost globally in 2021. According to a report from Techwire Asia, the shortage of semiconductors has caused manufacturing lead times to increase from an average of three to four months to an average of 10-12 months.

Some of the industry’s largest players took major hits. According to a report from Motor Trend, General Motors’ (GM) net income fell 40%, to $2.4 billion in Q3 of 2021. The company’s North American profits were sliced in half that quarter, down to $2.1 billion.

The Semiconductor Shortage Has Forced Automakers To Cut Production

Earlier in 2021, GM’s Chief Financial Officer Paul Jacobson announced that the company would cut roughly 200,000 units out of its production schedule in the second half of the year. Motor Trend reported that GM plants ran at only 60% capacity in Q3 as a result of scheduled downtime. The company’s factories ran at 112% capacity during the same period in the previous year.

GM’s production problems are far from unique. The lack of sufficient semiconductors caused widespread production cuts around the globe. Worldwide, carmakers