What is happening with the automotive industry?

what is happening with the automotive industry

Many industries are being affected as the chip crisis continues to cause scarcity of vehicles, video cards, graphic and display adapters, gaming PCs, video game consoles and more.

The automotive industry has been hit particularly hard, now that all new vehicles rely heavily on this technology. When the Covid-19 pandemic started, lockdowns prompted a decrease in vehicle demand. As demand dropped and production facilities shut down, car manufacturers reduced their sales forecasts, and canceled many part orders, some of them being microchips. Once restrictions were lifted and the vehicle demand normalized, automobile manufacturers were not able to keep up. Chip manufacturers had already taken on work from other companies to compensate for the automobile industry’s canceled orders, so by the time automakers asked for microchips, they couldn’t get them. 

Can’t chip manufacturers increase their production to meet the demand?

The process of microchip manufacturing is labor-intense, complex and costly. Additionally, there are few chip manufacturers in the world, and they are already working at maximum capacity. Adding new facilities entails a huge investment and planning, which takes time..

How long is this expected to last?

It is difficult to predict the end of the chip shortage crisis. However, we can certainly expect scarcity throughout 2022. Many experts convey that normal production will not go back to pre-pandemic levels until 2023, and according to microchip makers, it will take almost two years to catch up with the current demand. 

Many governments have discussed their plans to invest billions to counteract the current shortages. The U.S President Joe Biden plans to put out more than $50 billion to increase domestic chip development and production, and the European Union has proposed $48 billion to build their chip capacity. On their part, China plans to spend around $150 billion to jumpstart chip production there.  It looks like this investment will do more to prevent future shortages, rather than solve this one. For now, chip manufacturers have been working on increasing their capacity. But building new production facilities takes time and money.

What to do in the meantime?

While the situation improves and the demand for chips and semiconductors can be met, it is key for companies to look into other options to get raw materials. The pre-owned equipment market is an interesting choice for those looking at Industrial Equipment who cannot wait for demand to normalize. EquipNet offers multiple channels to help companies find the equipment they need. Take a look at our MarketPlace, where you will find equipment from industry leading manufacturers. Or check out our Auctions and Own It Now channels for a chance to get top quality equipment at a lower price. Contact us to learn more. 

Categorias: Industrial