4 minute read
Semiconductor crisis
SHORT CIRCUIT?
September’s new car sales fell off a cliff thanks to the global semiconductor crisis – and the light at the end of the tunnel is still a fair distance away…
The UK has just seen its worst September for new car sales since the twice-yearly plate changes began in 1999. But while some of the slowdown in sales can be put down to economic uncertainty, the biggest factor affecting new car sales throughout the whole of 2021 has been availability – or rather, the lack thereof.
For the first time in September there wasn’t a Ford in the country’s top 10 seller list, as the Blue Oval suffered worse than many of its competitors from a crisis that is affecting more than 160 industries.
Among them, the global car industry is one of the hardest hit and is expected to lose over $210bn – circa £154bn – over a two-year period, according to US business news channel CNBC. As the supply of new cars dries up, it’s a far cry from a decade ago when airfields across the UK were full of unsold stock as a result of overproduction during the global economic crisis.
The Society of Motor Manufacturers and Traders reported a ‘desperately disappointing September’ as new car registrations tanked by more than a third (34.4 per cent) to just 215,312 – a worse result than last September when Britain was still feeling the hardest impact of the coronavirus pandemic.
It’s the ongoing shortage of semiconductor microchips that continues to affect vehicle availability the most, according to SMMT chief executive Mike Hawes.
He said: ‘Despite strong demand for new vehicles over the summer, three successive months have been hit by stalled supply due to reduced semiconductor availability, especially from Asia.
‘Nevertheless, manufacturers are taking every measure possible to maintain deliveries and customers can expect attractive offers on a range of new vehicles.’
Although that strong consumer demand might be seen as a positive, the longer-term prognosis isn’t exactly pretty, with semiconductor supply issues projected to last until at least 2023, affected by further lockdown activity earlier this year in Malaysia, which supplies around 10 per cent of the world’s semiconductors – commonly found in car ECU, security and infotainment systems.
IT and systems research company Gartner has projected a best-case scenario that sees semiconductor availability returning to normal at the end of 2022’s second quarter, or potentially the end of the same year, depending on market forces and global production capacity.
‘The shortage will severely disrupt the supply chain and will constrain the production of many electronic equipment types in 2021 and beyond,’ said Kanishka Chauhan, principal
SMMT chief executive Mike Hawes
research analyst at Gartner. ‘Foundries are increasing wafer prices, and in turn, chip companies are increasing device prices.
‘There are capacity constraints and shortages for substrates, wire bonding, passives, materials, and testing, all of which are parts of the supply chain beyond chips.
‘These are highly commoditised industries with minimal flexibility or capacity to invest aggressively [at] short notice.’
In layman’s terms, what that means is that the semiconductors available will be sold to the highest bidder, and if carmakers’ contracts are due for renewal, it could also mean high prices for consumers in the future.
Global consulting firm AlixPartners is now forecasting that 7.7 million units of production will be lost in 2021 – nearly twice the 3.9 million figure in its May forecast – as the availability of semiconductors shows no signs of freeing up.
The biggest impact came between March and June this year, according to Dan Hearsch at AlixPartners.
‘The second quarter of [2021] is still the worst for chip shortages so far in terms of lost vehicles,’ he said.
‘But what’s changed is that the auto industry globally simply hasn’t recovered as quickly as we thought, due to unforeseen things like the rise of the Delta variant and Covid breakouts in Malaysia and other south-east Asian countries.’
Car manufacturers across the globe, including Ford, GM, Mercedes-Benz and Nissan, have warned of substantial losses as a result of the crisis, while dealers are having to sit and wait until production frees up.
It’s a torrid time all round, offset only by the resultant boom in used car sales, with values up 16 per cent so far in 2021, according to analysts Indicata UK – a silver lining for some to the semiconductor cloud hanging over others, and that cloud is staying firmly put for the time being...
