From phones to fridges, semiconductor chips have become a lynchpin of the way we live and work, and the automotive sector is taking an ever-larger share.
Today’s increasingly connected, electrified and autonomous vehicles are all hungry for that processing power – but at the moment, it’s in short supply.
Why is there a semiconductor shortage?
The problem has snowballed. Manufacturing took a hit at the start of the pandemic, as factories were shuttered without warning, then restarted with reduced staff and limited capacity. That’s a big problem for the automotive industry, which has a complex supply chain and tends to run light on stock.
Semiconductor supply is particularly fragile. Cautious about durability and safety, car makers use what Intel’s CEO recently described as “legacy” technology compared with the consumer electronics sector, and only a handful of facilities make these chips.
Two were affected by severe storms in Texas last February, one in Japan caught fire in April, while summer droughts slowed production at another in Taiwan.
With the Semiconductor Industry Association claiming it takes six-months (and significant investment) to bring new facilities online, and the war in Ukraine affecting the supply of neon gas and palladium used during semiconductor production, these issues aren’t going away any time soon.
How is the semiconductor shortage affecting fleets?
Semiconductors are a component within a component, so it has taken a few months for the impact to come to light. At best it has meant dropping optional extras off price lists, at worst manufacturers have been closing factories to avoid ending up with lots full of unfinished cars. Estimates vary, but IHS Markit says that seven million fewer vehicles were built during the first three quarters of 2021.
Fleets, which rely on scheduled vehicle replacements, are facing some real headaches as a result, including:
Delayed deliveries Factory-ordered cars are now taking three to six months to deliver, while vans can take a year. The BVRLA, which represents the UK’s rental and leasing sector, says restricted supply had become its members’ number-one concern.
Missing equipment Some manufacturers are deleting previously-standard non-essential equipment to keep production going or are offering reduced model ranges. For example, only one version of the Volkswagen ID 3 is available in the UK at the moment.