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Semiconductor shortage ‘will outlast pandemic’

The global semiconductor shortage is likely to outreach and outlast the Covid-19 pandemic, as the industry weathers the ‘perfect storm’.

The effects of the growing automotive supply chain issues will have a longer-term impact, hitting everyone from suppliers to customers – including fleet buyers

According to software provider VNC Automotive, the effects of the growing supply chain issues will have a long-term impact, hitting everyone from suppliers to customers – including fleet buyers.

Tom Blackie, founder and CEO, VNC Automotive, said: “In conversations with clients and suppliers, it’s become clear that the effects of the semiconductor shortage will long outlast the pandemic, and will potentially have a far more serious impact on sales and future development.

“Some of our suppliers are seeing prices for chips that are more than 30 times higher than before, and at that level, their use is no longer sustainable.

“We’re even seeing vehicle buyers and fleet operators having to consider purchasing models that aren’t on their preferred lists because that’s all that’s available. At a time when the industry is asking people to consider making the switch to EVs, supply restrictions are leaving them frustrated.”

It’s the latest confirmation that the fleet sector is being directly impacted by the chip shortage.

Earlier this year, the Association of Fleet Professionals (AFP) warned operators to start planning ahead for potential disruption to new vehicle supplies while FleetCheck reported that operators are facing “worst-ever” vehicle delays – and delivery times of up to a year are becoming common.

And the Vehicle Remarketing Association (VRA) has also forewarned that the supply chain problems look likely to get worse before they get better. A new report from the VRA indicates that the problems could last for some time – certainly well into the second half of 2021 and possibly into 2022.

According to VNC, the increase in demand for electronic devices and the car industry’s faster-than-anticipated sales rebound after enforced factory shutdowns have compounded other supply chain disruptions caused by fires and natural disasters at critical production plants.

And it says there are fears for reductions in functionality and increased costs, as well as future technology and investment, as the sector continues to weather the storm.

VNC Automotive has been looking at ways it can improve the situation for its customers by replicating much of the processing normally performed in silicon with rapidly deployed software instead. Its software is already used in approximately 35 million vehicles worldwide for entertainment, navigation and telematics systems, and the firm said it has experience across the entire transport industry.

OEMs are also taking evasive action. On its most recent earnings call, Tesla CEO Elon Musk spoke on the issue of substituting alternative chips into production vehicles – having to write the new firmware in a ‘matter of weeks’, and the ‘intense effort’ this approach required. But this is not an approach that all manufacturers will be able to take.

Companies, such as Bosch, are also looking at establishing their own manufacturing plants in order to create a guaranteed chain of supply. But this has implications, particularly with regard to increased costs and the possible negative knock-on effect for previously planned investment.

“Suppliers and OEMs may now be forced to simplify their designs to use fewer complex components that are still available,” Blackie continued, “and we’re concerned this will lead to a reduction in functionality at a time when consumer expectations have never been higher.”

“It’s also possible that systems hurriedly adapted to use a simpler component set may quickly be left behind as future generations of mobile phones cease to support the older platforms they may be built on.”

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Natalie Middleton

Natalie has worked as a fleet journalist for nearly 20 years, previously as assistant editor on the former Company Car magazine before joining Fleet World in 2006. Prior to this, she worked on a range of B2B titles, including Insurance Age and Insurance Day.