Chip Shortage Slams The Brakes On Automakers Who Stand To Lose $210 Billion
While we are over here complaining about the lack of graphics cards and, at times, out-of-stock CPUs (AMD's Ryzen 9 5950X and Ryzen 9 5900 were difficult to obtain for a period of time), the auto industry is facing related challenges of its own. As in, automakers could miss out on a whopping $210 billion in revenues this year, due in large part to the lingering chip shortage.
It makes sense, considering today's vehicles are much more than just a bucket of bolts and steel slapped together. Automakers employ advanced electronics across their fleet—infotainment systems, electronic displays, and intelligent technologies like adaptive cruise control and of course self-driving capabilities are not uncommon. And they're not powered by petrol (not directly, you nitpicker, you).
In a new report, consulting agency AlixPartners adjusted its forecast for how much the auto industry will lose in global revenues this year. Back in May, it had forecast automakers would leave $110 million on the table on production of 3.9 million units. But now it has nearly doubled its estimate, to $210 million on 7.7 million units.
"Of course, everyone had hoped that the chip crisis would have abated more by now, but unfortunate events such as the COVID-19 lockdowns in Malaysia and continued problems elsewhere have exacerbated things," said Mark Wakefield, global co-leader of the automotive and industrial practice at AlixPartners.
Back in June, at least one analyst at Goldman Sachs believed the industry was in the "worst period" of the shortage at the time, and that things would improve in the coming months. However, the analyst also noted that the auto industry was one of the hardest hit.
Meanwhile, both TSMC and Intel are shoveling billions of dollars into fab plant upgrades and expansions. It will take some time for those investments to impact supply, though, and right now fabs are running at max capacity.
Unfortunately for automakers, the chip shortage is just one part of the problem. Wakefield pointed to other "extraordinary disruptions" within the industry, "including everything from resin and steel shortages to labor shortages. There’s no room for error for automakers and suppliers right now; they need to calculate every alternative and make sure they’re undertaking only the best options."
On the bright side, these are temporary problems. But until they get worked out, a lot of companies stand to miss out on a lot of revenue.