Semiconductor fabrication plants generally utilize new manufacturing processes to produce higher profit chips for computers, advanced medical products, smartphones, and other electronic products.[3] Conversely, manufacturers build cars and trucks using older, cheaper chips created with obsolete technologies.
Some parts and systems require multiple chips. In fact, one car part could require 500 to 1,500 chips depending on the complexity of the component.[4]
Changing chips isn’t an easy process for the auto manufacturing industry. Enrico Salvatori, the president of chipmaker Qualcomm Europe, said redesigning circuits and circuit boards for future vehicles is complicated.[5] So, for now, new cars and trucks will continue to run on old-style chips.
The Semiconductor Chip Outlook for 2022
The long-term remedy is to achieve semiconductor self-sufficiency in North America. However, that might take a while — building semiconductor manufacturing facilities takes years and billions of dollars.
Next year, Samsung will build a semiconductor chip factory in Taylor, Texas. The company plans to begin building the factory in the first half of 2022 and to have the facility operational in the second half of 2024. Meanwhile, smaller chip producers operating older foundries intend to step up chip production to help meet the current demand. However, it will take a while before manufacturing processes catch up to shortages.[6]
It may take another year for chip inventories to return to normal levels. For now, automakers have developed workarounds[7] to the issue by
- Cutting production of low demand, low-profit vehicles
- Redirecting semiconductor chips into more high demand vehicles that consumers want
- Partially building vehicles and holding them until chips become available
- Building new cars and trucks without some comfort features such as heated seats
Buy a New Vehicle Now or Wait?
The chip shortage has increased the value of both new and used vehicles. That means a higher trade-in value for your car may be an incentive to buy a new one — if you can find the make and model you want at the price you want.
According to the latest research by Kelly Blue Book, almost half of new car shoppers will consider sitting out this market as they wait for lower prices.[8]
If you cannot wait to purchase or lease a new vehicle, finding the vehicle you want may be challenging with the limited inventory at dealerships. Consumer Reports recommends looking at vehicle models you haven’t previously considered or holding on to and maintaining your current vehicle.[9] Should you decide to keep your vehicle, take into account that auto repair shops are also affected by chip shortages as well as workforce shortages. Additionally, low stock of ordinary auto parts (oil filters, brake pads, etc.), held up due to U.S. shipping port bottlenecks, may cause longer waits for auto services. So be prepared to wait for vehicle maintenance and repairs.
Jake Fisher, senior director of Consumer Reports’ Auto Test Center, recommends holding off until the market has shifted in the buyer’s favor. “Now is a terrible time to buy a car, so it’s probably best to avoid it if you can,” he said.[10]
If you have no option but to shop now, Kelly Blue Book recommends these strategies to help you find the right car that fits your budget:[11]
- Search to a broader geographic area.
- Be prepared to shop for several weeks, calling or visiting dozens of dealerships.
- Shop around your trade-in as you would shop for the right car.
Buying a car now is more challenging — and more expensive — than ever. Until the chip supply improves, be flexible, be persistent, and be patient.
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Related News:
- A shortage of parts distributor drivers and auto repair technicians, and difficulty in finding qualified technicians is contributing to the distribution issue. https://www.moderntiredealer.com/articles/32529-research-shows-effects-of-supply-chain-issues-on-repair-shops
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Your car could be worth more than it was at the start of your lease. (https://www.cnbc.com/2021/11/16/car-lease-ending-soon-another-one-may-not-be-your-best-option.html)
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Everything you need to know about the chip shortage that's plaguing automakers https://www.freep.com/story/money/cars/2021/06/15/car-chip-shortage-2021/7688773002/
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Demand for electronic consumers goods has exploded since the pandemic started https://www.supplychaindive.com/news/semiconductors-tsmc-general-motors-ford-Infineon-mcu/595214/
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Car Repairs Stretching for Weeks Due to Supply Problems https://www.kbb.com/car-news/car-repairs-stretching-for-weeks-thanks-to-supply-problems
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How are car tire supplies affected by rubber shortage: https://www.newsweek.com/how-are-car-tire-supplies-affected-rubber-shortage-1644075
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Logjam at Los Angles area ports begins to ease https://www.pressherald.com/2021/11/10/cargo-ship-logjam-at-los-angeles-area-ports-begins-to-ease/
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In a global supply chain with no quick fix, companies are paying to ship air https://www.cnbc.com/2021/10/27/in-supply-chain-with-no-easy-fix-companies-are-paying-to-ship-air.html
Sources:
[1] What Car - How Long Will You Hae to Wait for a New Car
[2] [4] [7] [8] Detroit Free Press Freep - Car Chip Shortage
[3] ZNet - The Global Chip Shortage is Still Causing Big Problems for Car Makers
[5] Auto Evolution - Qualcomm Car-to-Everything Communication Details
[6] Samsung - Samsung Electronics Announces New Advance Semiconductor Fab Site in Taylor Texas
[8][11] Kelly Blue Book - Shoppers are Dealing New Car Purchase Thanks to High Prices Low Supply
[9] Consumer Reports - Global Chip Shortage Makes it Tough to Buy Certain Cars
[10] Consumer Reports Testing Center - How Consumer Reports Tests Cars
Disclaimer: Claims by and links to third-party websites are not endorsements.
