Everything You Need To Know About The Automotive Semiconductor Shortage

The world has seen some pretty drastic changes over the last 2 years. The COVID-19 pandemic meant making major adjustments to our everyday lives, many of which are likely to be here for quite some time. It’s not just our personal lives that have undergone changes though – industries across the globe have had to endure a variety of detrimental situations. The automotive industry is no exception. With a severe shortage of semiconductor chips in the automotive world recently, vehicle manufacturers have had their production processes practically halted or severely slowed, especially in the UK.

What is a semiconductor?

Essentially, a semiconductor is something physical, typically a substance, that’s created to manage and control current in electronics, and the semiconductor itself forms the foundations of processing chips. The semiconductor is the wafer that a chip’s components (such as transistors and wiring) are attached to, forming an integrated circuit (IC).

What are semiconductor chips used for in vehicles?

You could think of these semiconductor chips as part of a vehicle’s brain. They power a huge array of features in cars, vans, trucks and other automotive creations. Everything from power steering and electric handbrakes, through to reverse cameras, parking sensors and more all rely on semiconductor chips to operate. They’re a vital component in modern vehicle manufacturing, and without them, the enormous advancements that have been made in vehicle features and technology over the last few decades probably wouldn’t have happened.

microchip-with-circuit-white-background

Why is there a shortage of semiconductor chips for vehicles?

In the UK alone, the shortage has meant that car production in the country has fallen to its lowest level since 1956. In July this year, approximately 53,000 vehicles were produced in the UK, marking an enormous drop of more than 37% compared to the previous year. Demand for these vehicles is still extremely high, particularly now that lockdown restrictions are seeing a significant reduction. As a result, a huge increase in travel requirements means that more and more people need vehicles for commuting and getting back to some degree of normality in their lifestyles.

The shortage has emerged predominantly as a result of the COVID-19 pandemic. Chip manufacturers across the globe shifted their focus to producing chips for household appliances and electronic devices in order to meet the enormously accelerated demand whilst people were spending much more time in their homes. Consumer products needed more advanced chips, particularly in the computer industry.

It wasn’t just down to the increased demand for consumer products though. The rapid shift to a higher vehicle demand in 2021 meant that automotive chips were in extremely high demand. New technologies, such as driver assistance systems and autonomous driving capabilities, became a high priority for a huge range of manufacturers, meaning large quantities of these more advanced chips needed to be developed and produced in order to meet this new demand.

A significant portion of the world’s semiconductor chip supply, approximately 70% to be more precise, is produced by just two companies based in Asia. As you can imagine, the surge in demand can put a tremendous amount of strain on an industry where such a low number of companies operate, and due to the extremely high entry barriers into manufacturing these chips, it’s proving to be difficult for new organisations to rise up and ease that strain. Enormous monetary investments, astounding learning curves, and the constant evolution of technology (particularly at the rate that chips become obsolete) means that new companies have a seemingly impossible struggle to establish themselves in the semiconductor chip sector, particularly in the short term. It can take years for a new chip manufacturer to become production-ready.

manufacturing-microchips-with-close-up-examining-test-sample-microchip-transistor

What does the shortage mean for drivers in the UK?

If you’ve tried to purchase a new vehicle within the last year or so, it’s highly likely that you’ve been met with the infuriating situation of a prolonged delay. The shortage of chips and dramatic reduction in vehicle manufacturing has meant that new cars have been significantly delayed when it comes to making their way to forecourts across the country. Unfortunately, it’s projected that this is going to continue well into 2022 as well, so that delay is likely to be around for quite some time.

We already mentioned the significant drop in production in July, but vehicle numbers dropped even further in August this year, with roughly 37,000 being produced throughout the entire month in UK factories. Experts believe that the chip shortage will result in a grand total of 100,000 fewer cars being produced in the UK throughout 2021, meaning thousands upon thousands of drivers have to endure a lengthy wait for their new vehicles.

To put the numbers into perspective, so far 2021 UK vehicle production in August was only up by 14% compared to August 2020. This might sound positive, but when you consider that the pandemic resulted in nationwide factory closures, that suddenly becomes a lot more daunting. Compared to 2019 for example, UK vehicle production is down by a huge percentage of 32% across the same period August.

How can drivers negate the effects of the shortage and still obtain quality, reliable transportation?

For many, reliable transportation through the use of an easily accessible personal vehicle is a necessity. Unfortunately, these new vehicle delays mean that many buyers may have felt that that is no longer an option. However, that’s not the case.

When it comes to getting into the driver’s seat of a vehicle, be it for commuting or personal use, a short-term lease is the perfect solution. Here at Flexed, we can provide you with a flexible short-term contract to keep you driving for as little as just 28 days. That means if you’re experiencing a delay for a vehicle you’ve bought, we can give you the transport you need to tide you over until your purchase is ready. If your delay is longer than 28 days, that’s not a problem. Our contracts can be extended at any time, giving you the flexibility to lease a high-quality car or van for as long as you need, without tying you into long-term commitments. When your purchased car is ready, you can simply return your lease car to us and end your contract.

Our flexible 28-day rolling contract leases come with a whole host of extras to give you everything you need to get yourself out on the road:

  • Vehicle maintenance
  • Vehicle recovery
  • 24-hour emergency assistance
  • UK road tax
  • Full manufacturer’s warranty
  • The option to switch your car every 28 days, and no cancellation period

We can even provide you with insurance that covers you and two additional drivers to drive your lease car.

Want to find out more about our 28-day lease contracts?

Give us a call today on 0800 311 8290 and talk to a friendly member of our team.

Find out more about our car leasing services and fantastic offers for both Business and Personal use. Give us a call today on 0800 311 8290.

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