The current global shortage of integrated circuits (or ICs) is the result of ongoing logistical challenges and manufacturing delays caused by COVID-19 shutdowns, as well as largescale market shifts that were in motion before the pandemic began. A further negative development is a recent fire in a Tokyo Renesas chip manufacturing plant. Renesas has nearly a third of the global market share for microcontroller unit chips found in a variety of vehicles.

What Is the significance of ICs?

ICs are the building blocks for electronic technology used in health care, communications, computing, energy delivery and transportation.  ICs are comprised of semiconductors, with half of global demand sourced from the US, supporting a workforce of over one million jobs and nearly $200 billion in revenue.

Why are ICs important to the automotive industry?

The automotive industry is in the midst of a technological paradigm shift, responding to governmental emissions mandates to electrify their vehicle offerings. Tesla has been joined by other start-ups as well as the established major carmakers, all committing to electrification first and then autonomous vehicles to shape the future of mobility.

Conventional combustion engine vehicles are not being overlooked, with new safety technology including collision avoidance systems, adaptive cruise control and sophisticated displays.

In all cases, these technologies draw heavily upon electronics using ICs as the brain.

How is the integrated circuit shortage affecting the automotive assembly?

Increasing demand for technology-laden vehicles and the supporting transportation infrastructure have created a bullwhip effect and rattled the automotive value chain. Companies such as Honda, Volkswagen and Toyota have scaled back production lines due to the shortage. According to IHS Markit, they estimate a million vehicles will have delayed production in the first half of 2021 but are hopeful that the industry will recover for the remainder of the year, although they are stating that the situation is “fluid.”

Fitch Solutions say that this shortage of IC chips could last significantly longer than has been first anticipated by many, perhaps until the start of 2023. This could be damaging to suppliers for other components that go into automobiles they may see demand stagnate due to production delays.

How are fine chemical suppliers key to managing the challenges in the automotive market and IC market?

Fine chemical suppliers are key to helping relieve the current IC supply bottleneck as well as helping to ensure the automotive industry will be able to catch up on lost production. They are experiencing massive pressure to deliver on raw materials for IC production and to find innovative ways to ramp up production and deliver to their customers.

Fine chemical suppliers for other automotive electronic components including rigid and flexible printed circuitry, sensors, relays, switches, electric motors, and wire and cable are working to manage their inventory and production while planning for a sharp increase when the IC shortage is relieved.

How are we handling this?

CABB’s portfolio products and custom manufacturing services support clients throughout the automotive value chain. We are managing both sides of the issues caused by the IC shortage. To do this, we focus on our core value of partnership with our customers, communicating regularly to help identify short- and medium-term needs, while coming up with innovative solutions to support the long term growth of the global automotive industry. We will continue to share news about the IC shortage; if you have any questions, simply contact a member of the team today.


Further Reading

Automotive Logistics