Semiconductor Chip Shortages Continue to Plague Automotive Industry

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In the current landscape of chip shortages, consumers could face car prices hiked for the rest of the year.

The automotive industry stands to lose the most, as the shortage is plaguing every company within the industry. Ford just released quarterly earnings reports, and the stock tanked up to 10% after beating earnings due to their concerning statements about chip shortages and how it could drag the company down in the coming quarters.

The shortage ballooned to the point it’s at today due to a culmination of poor US trade relations with Chinese tech companies, supply shock from the industry rebounding from the pandemic, and the lack of suppliers in the global market.

Large staples within the semiconductor industry like Taiwan Semiconductor Manufacturing Company (NYSE: $TSM) and Samsung (KRX: $005930) have a huge stake in the global supply chain. In fact, TSMC has decided to expand its manufacturing capacity and raised its budget to $28 billion. But expansion takes time, and shortages will likely persist throughout the year.

Automotive demand has surged in Q1 and will likely keep growing as the pandemic eases up. Seasonal cycles for vehicle demands usually spike during spring as well, so companies will have to work overtime to meet delivery quotas. There is ample reason to believe that car prices will be raised during the coming year, and prospective car owners may have to think twice about purchasing a new model during 2021.

 

Sources: HBR, CNN

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Morgan Tseng

Morgan Tseng is a senior studying Business Economics and Business Information Management at University of California, Irvine. He has a background in research and analytics as he spent a quarter participating in the research of the Development Finance Corporation and its effects on developing countries. He is passionate about the investing landscape today, and the ebb and flow of bull and bear markets. He believes that credibility and ethics are the most important parts in business. In his spare time, he loves to play the guitar and piano.