Global microchip shortage forces OEMs to reassess their supply chains

After an extremely tough year for the automotive industry supply chain, suffering from Covid disruptionair-freight capacity shortages and a sharp pivot towards EVsa shortage of vital microchips across the industry is causing further challenges for OEMs and suppliers.

The automotive industry saw a sharp decline in sales in the early stages of the Covid pandemic but bounced back quickly in the second half of 2020 resulting in a shortage of supply for the critical microchips amidst uncertainty on production figures. The issue has been exacerbated by the sharp increase in demand for laptops, smartphones and gaming devices during lockdown as many products share the need for the same resource. Demand for these devices over Christmas and Chinese New Year has placed further stress on a stretched supply at a time when vehicle production is ramping up after the initial Covid-induced slump.

Automotive production has rebounded quicker than many outside the industry had predicted with China’s strong recovery, which began in summer 2020, providing a welcome market for OEMs whose home markets were still struggling.

Semiconductor lead times can be up to nine months and with microchip supply looking to be insufficient until the summer 2021, OEMs are beginning to look at alternative ways to source these critical parts in an attempt to secure their supply. This will cause significant challenges for both OEMs and their suppliers. An increase in the requirement for premium logistics is expected as the different parties work together to fill the supply gap and OEMs rely on new and untested suppliers, routes and communication channels.

“The automotive industry is proven to be resilient and agile in the face of these challenges” said Graham Little, Evolution Time Critical Managing Director, “and we expect an increased demand for premium logistics as the industry makes supply chain adjustments to mitigate the impacts of the shortages.”