Semiconductor Shortage to Cost Automakers $110B in 2021

The ongoing semiconductor shortage will cost the global automotive industry $110 billion in lost revenues this year, AlixPartners estimates, up more than 80% from the consultancy’s late-January estimate of $61 billion.

Production of 3.9 million vehicles will be lost in 2021 as a result of the shortage, AlixPartners forecasts.

“The pandemic-induced chip crisis has been exacerbated by events that are normally just bumps in the road for the auto industry, such as a fire in a key chip-making fabrication plant, severe weather in Texas and a drought in Taiwan,” Mark Wakefield, global co-leader of the automotive and industrial practice at AlixPartners, says in a news release. “But all these things are now major issues for the industry – which, in turn, has driven home the need to build supply-chain resiliency for the long term.”

Adds Dan Hearsch, a managing director in AlixPartners’ automotive and industrial practice: “There are up to 1,400 chips in a typical vehicle today, and that number is only going to increase as the industry continues its march toward electric vehicles, ever-more connected vehicles and, eventually, autonomous vehicles. So, this really is a critical issue for the industry.

“But the top priority for companies right now is mitigating the best they can the short-term effects of this disruption, which may include everything from renegotiating contracts to managing the expectations of lenders and investors. The important thing is to be proactive, and to be well-armed with good information and analysis.”

In the U.S., the shortage has caused the Biden Admin. to order a 100-day review of domestic supply chains, CNBC reported. About $50 billion of President Biden’s $2 trillion infrastructure proposal is earmarked for the American semiconductor industry.

Ford alone anticipates losing 1.1 million units of planned production this year because of the shortage, including a cutback of up to 50% in the second quarter, CEO Jim Farley said in late April during a conference call with financial analysts. The impact on production will continue to be felt well into second-half 2021 and could extend into 2022, he said.