Semiconductor Shortage Hits Car Production

Many industries have been feeling the pressure as a result of global supply shortages of semiconductors, such as gaming and consumer electronics.

But a new report from the Society of Motor Manufacturers and Traders (SMMT) shows that car manufacturing in the UK is also taking a big hit, which could spell bad news for the industry over the coming months, as the chip shortage shows no sign of abating.

According to the SMMT, car manufacturing output in the UK fell by more than 41% in October 2021, with just 64,726 units produced. That was the fourth consecutive month in which output dropped, and was the weakest October performance since 1956.

The SMMT has cited the global semiconductor shortage as a key factor behind this decline, with Chief Executive Mike Hawes describing the situation as “extremely worrying”.

He stated that while the UK’s automotive industry is resilient, Covid-19 is “resurgent” across many of its key markets, while global supply chains are “stretched and even breaking”.

This, he said, means the immediate challenges in keeping the car manufacturing industry operational are “immense”.

Mr Hawes has therefore urged the government to take action to support the sector, such as working to address high energy costs and supporting employment and training. He also called on ministers to introduce measures to boost the sector’s competitiveness in line with global rivals, and help businesses whose cashflow is currently under pressure.

This is far from the first warning from a prominent organisation of the impact of the global semiconductor shortage.

Brandon Kulik, head of Deloitte’s semiconductor industry practice, recently predicted that the chip shortages currently being experienced worldwide could last for some time.

Speaking to Ars, he said the supply issues are “going to continue indefinitely”, adding that this probably meant years rather than months or quarters.

Simon Segars, chief executive of chip design firm Arm, has also spoken of the scale of the problem, telling the Web Summit event earlier this month that the shortage is the “most extreme” he has ever seen, with the wait for chips taking up to 60 weeks.

As a result, he believes many people who have bought devices for Christmas “might be disappointed”.

Mr Segars stated that many factors are contributing to the shortage, including a sudden increase in demand for cars, the rollout of 5G and geopolitical tensions between western and Asian nations.

The sheer scale, number and complexity of these issues suggests that the shortage of semiconductors could be with us for some time yet, and that businesses delivering products such as cars, gaming consoles and mobile phones could struggle to fulfil many of their orders.