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COVID-19 ISO Insights

Pandemic Impact: Shortage in Computer Chips for Automakers

February 1, 2021

By: Christopher Sirota, CPCU

Many companies adapted to the changes in demand caused by the 2020 pandemic, with some switching product capacity priorities; the effects of such choices may not have been immediately apparent, but one now seems to be clear in 2021Q1: CNN has reported that the auto industry is trying to recover its volume of production in 2021 but is now challenged by a shortage in computer chips.

According to the article, during the beginning of 2020 pandemic demand for light vehicles dropped. In response, semiconductor manufacturers switched to producing computer chips for other products such as "smartphones, gaming systems and other tech gadgets that remained in high demand" during the pandemic. That switch has now reportedly caused a global shortage for automakers which some experts estimate could reduce global quarterly output by four percent or about 100,000 vehicles.

The average light vehicle reportedly depends on 50 to 150 computer chips.

Per the article, automakers worldwide have been affected by the shortage, including the following:

  • Ford closed its German plant of 5,000 employees that produces its popular Focus for one month. Ford also halted production of SUVs at a Kentucky plant.
  • Volkswagen adjusted production in plants in China, Europe, and in North America in 2021Q1; models reportedly affected include the VW Golf, and some models from its other brands Audi, Seat, and Skoda. Notably, Audi will reportedly furlough 10,000 employees at plants in Germany and Mexico.
  • Fiat Chrysler has planned to shut a plant in Canada that produces models such as the Chrysler 300 and the Dodge Challenger and Charger. Its plant in Mexico that produces the Jeep Compass is also reportedly experiencing delays.
  • Toyota, Nissan, and Honda: all three Japanese automakers have reportedly initiated various production adjustments, including in plants in China and in Texas.

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