Impact of Global Crisis of Electronic Chips on Automotive industry

by Zahidul Hossain

Electronic chips are the nervous system that controls all the electronic devices in the world. As these chips are an inevitable part of any electronic device, regular manufacture and supply of chips on demand are mandatory. But during a long time COVID-19 pandemic, the insufficient supply of chips has created a global chip shortage. Especially, Automobile Companies are the worst sufferers of this critical situation.

A number of companies and organizations are involved in the design, development, production, distribution, and marketing of automobile vehicles [1]. The global crisis of electronic chips has created a severe crisis for both distributors of chips and manufacturers of electronic devices. Recently, the vehicle production of automobile companies decreased alarmingly. They have produced 77,621,582 vehicles in 2020, while the number of produced vehicles was 91,786,861 worldwide in 2019 [1].  The decrement rate is 16% [1]. The regional statistics give a more specific view of the ongoing crisis. The reduction rates of vehicle production were 20.5%, 21.6%, and 10.2% for NAFTA(North American Free Trade Agreement), Europe, and Asia-Oceania regions respectively in 2020 compared to 2019 [2]. The key reason behind this situation is the less supply of electronic chips due to the COVID-19 pandemic.

The renowned automobile companies are Ford, Stellantis, Honda, Nissan, and Toyota in the world. Three major automaker companies – Ford, General Motors, and Stellantis from Michigan faced severe production issues [3]. AutoForecast‘s report says Ford has halted the production of 324,616 vehicles due to the chip shortage [3]. General Motors has halted the production of 277,966 vehicles [3]. Stellantis has decreased output by 252,193 units due to scarcity [3]. Between 20,000 and 46,000 units were lost to the shortfall by Honda, Nissan, Subaru, Toyota, and Volkswagen [3]. The study showed Volvo with the lowest number of cars affected by the chip shortage at 1287 [3]. Volvo also sells fewer cars than many other automakers mentioned in North America [3].

The automotive industry has faced a significant revenue fall due to reduced production.  According to Felipe Muñoz, an analyst of Jato Dynamics, the overall revenue from the automotive industry was $1.03 trillion worldwide in 2019 [4]. But the top automobile companies’ revenue went downward in 2020 compared to 2019 that impact the whole revenue. The statistics show that the revenue fall for Toyota is from $280.5B to $255.9B; for Volkswagen is from $275.2B to $260.3B; for Daimler is from $189.2B to $186.66B; for Ford is from $149.9B to $127.1B; for Honda is from $142.4B to $125.0B; for General Motors is from $137.2B to $122.8B; for Nissan is from $96.3B to $73.9B [5] [1].

AlixPartners predicts that the global automotive sector will lose US$110 billion in sales this year due to the continued semiconductor shortfall [6]. There is an increase of more than 80% over the consultancy's late-January estimate of US$61 billion [6]. The company forecasts that the scarcity will result in the loss of 3.9 million automobiles in 2021 [6]. There is a high probability that dealers' inventories will decrease [6].   

The manufacturers have shortened vehicle output as this crisis longs five months [6]. They have done it for cars that are not as much in demand and not as profitable as trucks and SUVs [7]. It has shifted chips from automobiles to profitable vehicles [7]. They also build and park cars till chips are ready [7]. Instead, some have removed specific options that primarily rely on chips [6]. For example, Tesla took off the passenger side lumbar support; GM took out fuel-saving systems such as automated start-stop and fuel management modules [7].

The long-term automakers examine their supply chains [7]. They borrowed the just-in-time inventory method from Toyota to update necessary items like semiconductors, Krebs said [7]. The chip manufacturers strive to expand output and construct extra capacity, especially in the U.S. [7].

There are specific perdurable solutions to the global chip shortage for the world. First, we have to improve rigid supply chains that can reduce the global shortage [8]. We also should improve the liquidity of equipment. It will help chip makers to expand capacity and mitigate supply glut risk [8]. If we enable small manufacturers, they can compete in legacy technologies [8]. The process of machine recirculation can provide eco-stability in high-tech production [8]. At last, we hope that we can overcome the global chip shortage immediately.



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Annie White,     "Report Shows U.S. Automakers Bearing Brunt of Chip Shortage in North     America," 25 May 2021. [Online]. Available:


E. Vega, "2019     financial report of 28 mainstream auto companies in the world: total profit     decreased by 11% year-on-year," 16 April 2020. [Online]. Available:


I.Wagner,     "Revenue of leading automakers worldwide in 2019," 15 July 2020.     [Online]. Available:


D. Kaur, "How     carmakers are dealing with the global chip shortage," 20 May 2021.     [Online]. Available:


J. L. LaReau,     "Everything you need to know about the chip shortage that's plaguing     automakers," 15 June 2021. [Online]. Available:


Steven Zhou,     "The Global Chip Shortage: The Solution May Have Already Been     Manufactured," 28 April 2021. [Online]. Available:



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