The global supply for semiconductor chips have fallen down, which has majorly affected the automobile industry.
With industries and factories for chip productions shut down due to the pandemic, supply of these materials, which are the genesis of tech products and automobiles, have fallen down.
Major semiconductor manufacturers are based in South Korea, China and Taiwan. With the pandemic setting in, the demand for electronic items has increased by a manifold.
These devices require semiconductor chips, the production of which have been affected in the pandemic, due to shutdowns of factories and industries, just like any other market sector.
The effect has led to an acute shortage of semiconductor chips for the automobile sector, which has been struggling with the low supply since some time now.
Looking at the increasing demand of these chips, industry executives and economists have shown their concern about this shortage creeping onto the smartphone sector and affecting the production volumes of the same.
How are Smartphone and Automobile Sectors Affected?
With the onset of the Covid-19 pandemic, carmakers had shut down or slowed their production, predicting a reduction in car sales.
On the contrary, due to the pandemic, more people are preferring having an individual vehicle to avoid public transports. A major component required in automobile production is the semiconductor chip.
The catch here however, is that cars do not rely only on one type of semiconductor. They need both the latest versions for things like infotainment as well as less-advanced ones for components like power windows, states Carguides.
Due to an increase in the work from home cases, the demand for electronic appliances have increased, causing the demand for semiconductor chips to have risen exponentially.
As the demand has far outpaced the supply for production of semiconductor chips, the automobile and the smartphone sector are facing a shortfall.
According to the Semiconductor Industry Association, the demand for its products have increased by 6.5% in 2020 alone.
Smartphone Market to be Affected Next
According to the economist Iris Pang from ING Greater China, while the automotive sector has suffered an acute semiconductor shortage this year as Taiwan could not meet the production demand, China is resuming its production, which would reduce the load on Taiwan.
Speaking at the Reuters Global Markets Forum, Pang added that the Taiwanese semiconductor companies have boosted production in China, as Covid restrictions had disrupted factory output and port operations in Taiwan.
“China gained 5% on the chip shortage in terms of GDP – Taiwan semiconductor companies have planned well and built large factories in mainland China,” said Pang.
She also stated that with the Taiwanese semiconductor companies now tailoring mainly for automobiles, the chip shortage could be solved for the sector in a few weeks. However, this would in turn put a growing pressure on the smartphone production sector.
The broader supply crunch could last until the second quarter of 2022, said Adam Khan, founder of AKHAN Semiconductor, although he noted this timeline was ‘aspirational’.
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