The chip shortage is estimated to cost the auto industry $210 billion in lost revenue, according to AlixPartners.
See also: BMW, Ford and Honda reduce production due to chip shortage
The pandemic has hit many supply chains, but issues in the chip business have particularly hit the auto industry, with major car brands such as BMW and Volkswagen, Ford and General Motors warning of the impact of chip shortages on production.
AlixPartners has almost doubled its forecast for estimated losses since May, which were $110 billion to $210 billion. It predicts that car manufacturers will not produce about 7.7 million units in 2021, compared to the 3.9 million it had initially forecast in May. The drop in production is mainly due to, but not only because of, the global chip shortage.
The automotive industry was dragged down because the vehicles use cheaper chips that were created with older manufacturing techniques for vehicle microcontroller units (MCU).
Intel , for example, is struggling to achieve a 7nm technology. IBM is experimenting with 2nm technology. And while chip giant TSMC announced in July that it had achieved a 30% increase in MCU production, the automotive industry was less than 5% of TSMC's revenue in the first quarter of 2021. The company predicted that the chip shortage will continue until 2023.
See also: TSMC: Chipmaker lays off seven employees
AlixPartners' consultants forecast a similar timeframe for resolving the chip shortage in the automotive industry.
“Of course, everyone hoped that the chip crisis would have subsided by now, but unpleasant events such as the COVID-19 pandemic in Malaysia and ongoing problems elsewhere have made things worse,” said Mark Wakefield, head of the automotive industry.
“Also, chips are only one of the many disruptions the industry faces, including a shortage of resin and steel as well as a shortage of labor. There is no margin for error for car manufacturers and suppliers at this time.“
The chip shortage has caused some nations and regions to reassess how these supply chains can affect the broader economy. For example, the European Commission has the optimistic goal of increasing its market share from 9% today to 20% by 2030 as part of driving digital dominance.
See also: Global chip shortage could last until 2023
However, European Union President Ursula von der Leyen admitted last week that the EU's goal was a "difficult task" that some believe will be impossible to achieve.
