Consulting firm Ariel Platinum: chip shortage could reduce global auto industry revenue by $110 billion this year

A continuing shortage of semiconductor chips at US consulting firm (AlixPartners), is expected to reduce the global auto industry's revenue by $110 billion in 2021. That is 81.5% higher than the company's forecast of $60.6 billion at the end of January, as the auto industry will slash production this year.

Mark Wakefield (Mark Wakefield), co-head of Aliplatinum's automotive and industrial operations, said on Friday that a number of factors had prompted it to raise its chip impact forecast, including a fire at the Japanese chip supplier Renesa Electronics (Renesas) plant and the impact of bad weather, such as the cold wave in Texas in the US and drought in Taiwan, on the car supply chain, which exacerbated the chip crisis triggered by the novel coronavirus epidemic.

He also points out that all these events have now become a major problem in the industry-which in turn raises awareness of the need to build long-term supply chain resilience.

Ariel predicts that global car production will fall by 3.9 million in 2021 due to chip shortages, 1.7 million more than the 2.2 million forecast at the end of January.

In the United States, the Biden administration has ordered a 100-day review of the U. S. supply chain because of concerns about supply shortages. Of his $2,000bn infrastructure plans, about $50 billion is earmarked for the US semiconductor industry.

Some well-known car companies have issued warnings about the reduction in revenue caused by "lack of core". Ford has previously said that chip shortages will reduce its earnings by about $2.5 billion in 2021. GM expects revenue to fall by $1.5 billion to $2 billion as a result.

It is expected to improve in half a year under the condition of chip shortage.

Semiconductor chips are extremely important for automotive infotainment systems, power steering and braking. Experts point out that a car may have hundreds of semiconductors, depending on the vehicle and configuration.

Dan Hearsch, managing director of Aliplatinum's automotive and industrial operations, said in a statement that an ordinary car now contains as many as 1400 chips, and that number will only continue to increase as the industry continues to move towards electric cars, Internet cars and self-driving cars. He pointed out that the shortage of chips is a key issue for the industry as a whole.

The shortage of chips in the auto industry can be traced back to early last year, when COVID-19 caused car assembly plants to shut down in turn. As factories close, wafer and chip suppliers shift parts production to other industries, such as consumer electronics, which are less affected by home isolation.

Ariel expects car production to be the most affected in the second quarter and then gradually improve in the second half of this year until 2022, Hearsch said. He points out that this does not mean that the supply crunch will disappear completely next year, but carmakers should have enough semiconductors to produce the number of cars they need.