Carmakers, Beware: The Chip Shortage Could Turn Into a Chip Flood

Automakers struggle with the lack of chips 6 photos
Photo: Daimler
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The lack of chips has wreaked havoc in plenty of industries out there, leading to production delays and increased prices, so right now, the biggest names on the market are working with authorities across the world to increase their capacity and deal with the shortage as soon as possible.
In theory, this can’t happen overnight, but it will still take place rather sooner than later, with market research firm IDC anticipating that the “normalization and balance” will be reached by the middle of 2022.

In other words, the global chip shortage should be over in less than a year, with the semiconductor market to reach a growth of no less than 17.3 percent this year alone.

Needless to say, the markets fueling this growth are mobile phones, notebooks, cars, gaming, wearables, and smart homes, and IDC anticipates that the shortage would ease up through the fourth quarter of the year.

The automotive semiconductor revenues are expected to grow by as much as 22.8 percent, as more and more carmakers are placing orders, waiting for chips to keep their production unaffected without turning to other solutions, such as launching cars without certain systems.

But with so many companies investing in the production of semiconductors, obviously because the demand is at an all-time high right now, there’s a huge risk of oversupply. And IDC expects this to happen in 2023 when foundries out there would essentially produce more chips than customers can purchase.

So in theory, while the production levels will reach a good balance next year, the shortage is expected to become a chip flood in 2023, at which point the price of the semiconductors is expected to decrease significantly because that’s how the market works.

So everybody in the industry is recommended to handle the whole crisis carefully and plan in advance, especially as IDC expects the shortages in the automotive market to be mitigated by the end of the year.
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About the author: Bogdan Popa
Bogdan Popa profile photo

Bogdan keeps an eye on how technology is taking over the car world. His long-term goals are buying an 18-wheeler because he needs more space for his kid’s toys, and convincing Google and Apple that Android Auto and CarPlay deserve at least as much attention as their phones.
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