![]() ![]() In September, global consulting firm AlixPartners in Southfield said the chip shortages could cost the global auto industry $210 billion in revenue for the year. Why is there so much competition for chips? ![]() The damage was extensive and the plant is not yet up to full production, but they are hoping it will reach full production in June, Krebs said. The chip deficit was further complicated by a fire at plant owned by chipmaker Renesas Electronics in Japan. "This created a significant bottleneck in all manufacturing processes." This means that there was no ability to build inventory of products and solutions when businesses were able to turn their lights back on," McCabe said. "Everyone’s lights went off at the same time. Global chip production is monopolized by a few global, Asia-Pacific suppliers, said Joe McCabe, CEO of AutoForecast Solutions LLC. "By then, chip capacity was consumed by other businesses - phones, computers, video games - as people worked and schooled at home." "Automakers and suppliers that use chips contacted their chipmakers and put back their orders," Krebs said. So when the factories restarted, the stronger-than-expected demand for new vehicles outpaced production and has yet to catch up. ![]() Also, dealers figured out how to sell vehicles online, offering home pickup and delivery. Sales of new cars did plummet initially, but quickly rebounded with pent-up demand and 0% financing offers. The automakers, who have experienced previous recessions, quickly canceled orders for parts with computer chips, thinking auto sales would nosedive, said Michelle Krebs, executive analyst for Autotrader. So in March 2020, the global pandemic prompted automakers, suppliers and car dealerships to close down. More: GM to increase vehicle deliveries to dealers: 'Help is on the way' Why is there a chip shortage? More: GM build-shy strategy has tens of thousands of vehicles parked awaiting chip parts The chip shortage is a result of the COVID-19 pandemic, which increased demand for the personal electronics such as cell phones and laptops that the chips are used in to the point where production could not keep pace with demand. The raw materials for the semiconductor business often come from Japan and Mexico, with the chips made in Taiwan, China and some in the U.S. The chips underpin a global tech economy worth an estimated $3 trillion, the report said. Silicon feeds a $500 billion chip industry, according to a report by the BBC. They allow computers, smart phones, appliances and other electrical devices to function. The chips are tiny transistors made from silicon, which is found in most of the minerals on the earth's surface. Here's what you need to know about semiconductor chips: So what are these chips? ![]()
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