Automakers and analysts have been optimistic in recent weeks that the worldwide shortage of microchips would work itself out in the second half of this year. But that upbeat prediction is changing.
Many are now concluding that there is no easy path out of the mess because of the cost and complexity of the semiconductor supply chain. The growing outlook: The auto industry may have to rethink how it sources chips until producers can fulfill commitments for new capacity — a process that will take years.
"I have been in this industry for 31 years, and this is a situation I have never experienced before," said Peter Schiefer, president of the automotive division at Infineon Technologies, one of the largest automotive semiconductor makers, especially for power electronics.
"This will not be sorted out in the next few weeks," he said, noting the long lead time needed to source and produce chips, not to mention the years it could take to build new production lines.
James Norris, an analyst with LMC Automotive, put it equally bluntly. The "latest incoming information suggests that production disruptions will be more severe than initially thought," he said, with the shortage "expected to drag on until the closing months of 2021 and undermine the capacity for automakers to catch up lost volumes in the second half."
The reality could result in lost worldwide production of 2 million to 3 million vehicles this year, said Ondrej Burkacky, a leader of consulting firm McKinsey's global semiconductor practice. North America could lose 719,000 vehicles this year, according to AutoForecast Solutions Inc. And LMC is forecasting that chip shortages will cost Europe 330,000 vehicles, with the main losses at Daimler, Ford, Renault and Volkswagen Group.
Even if constraints begin to ease in the third quarter, danger lurks because of the seasonal nature of semiconductor demand: Ahead are Black Friday in the U.S. and Singles Day in China, when buyers rush for holiday bargains on all things electronic.
"That's high noon for producing all the chips that go into these consumer electronics devices," Burkacky said. "I would expect the second half of the year to be tougher."