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June 2021

Goodbye to 3.9 million vehicles in 2021 due to semiconductor shortage

Simonluca Pini - Contributor Editor de Il Sole 24 Ore

Chip sparked crisis will lead to a loss of about 110 billion dollars in revenue, according to AlixPartners, a global consulting firm
The expected loss sparked by the semiconductor crisis will amount to a fall of around 110 billion dollars in revenues and as many as 3.9 million vehicles less registrations. If, back in January, estimates were talking of a reduction of about 2.2 million vehicles and 61 billion dollars in losses, now the figures are far more alarming. This new "snapshot" was taken by AlixPartners, a global consulting firm, which released its latest forecast on the costs of the current semiconductor shortage for the global automotive industry.
"The pandemic-induced chip crisis has been intensified by events that are normally viewed as routine-like issues for the automotive industry, such as a fire at a major chip manufacturing plant or the drought in Taiwan," says Dario Duse, managing director and Emea co-leader for AlixPartners' Automotive and Industrial practice. “But all of this has now become a major obstacle for the sector, which is partially recovering from the collapse of business volumes in 2020; managing the crisis will not only be crucial in the short term. The entire supply chain needs to build resilience in the long term playing an active role in managing raw material supplies and logistics". Corrado Belicchi, director of the Automotive and Industrial practice, added: "As many as 1,400 chips can be found in modern vehicles, and this number will keep increasing as the industry continues its race towards an ever-increasing electric, connected and autonomous mobility model. However, the top priority for companies right now is to mitigate the short-term effects of this crisis using all possible levers, from contract renegotiation and production management to customer and investor expectations. What matters is to be proactive and have good information and analysis."
Given the rapid increase from January to May, the sector cannot rule out the possibility of suffering even worse scenarios. In fact, several manufacturers have already announced a possible extension of the semiconductor crisis well into 2022. This prediction underlines how fundamental is a deep revision of the entire production chain, no longer able to meet an ever increasing demand. All this will grow exponentially as electric vehicles become increasingly popular. The reason lies the number of components on board; a hybrid car requires up to 10 times more chips than a traditional ICE vehicle.
The current situation opened a window on a precarious scenario. The production of semiconductors lives in a constant state of emergency, as it is often affected by sudden surges in demand due to new devices being launched on the market or unpredictable trends. The Coronavirus played a major role in aggravating the current crisis forcing a number of production plants to close during the most acute phase of the pandemic. In addition, the recent fire at the Renesas Electronics factory, a major producer of semiconductors for the automotive industry, and a "trade war" between manufacturers have made things considerably worse.

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