Before knowing, what is a car chip? Let’s take a brief into a semiconductor chip, which is also known as microchip. A semiconductor chip serves the purpose of being the brain of new age electronics technology. And, the semiconductor chips used in modern cars are said to be car chips. Due to the pandemic, there has been a great shortage of semiconductor chips. This is mainly due to the affect it caused the supply chain industries. While this is one of the reasons why there is a shortage of car chip in the auto industry, there are other strong reasons for the shortage.
Reasons for shortage of car chips in auto industry
- Automobile industry is growing exponentially day by day. And. with growing developments in automobile sectors, the demand of usage of car chips in modern cars also grows, especially with the introduction of electric cars in the market. Every automobile company out there in the market introduce new and great features, with their every new release of any automobile, be it a new car, truck or any other vehicle.
- The pandemic affected the supply and demand as well as the forecast of the future in the automobile industry. With the shutdowns and spread of virus, the automobile manufactures question the future of their industry and cancelled the microchips for automobile to stop the further loss. But the thing they forgot to anticipate is that, the downfall of their industry was for a short time. The demand of cars indeed dropped greatly but it was temporary.
Well, you might wonder if the supply was cut off, the manufacturers can resume their supply once again and start producing the new cars in the market. Well it is not easy as it looks, here is why.
What is stopping manufacturers to make more car chips to meet the demand?
Well, producing a semiconductor is a very complex task. And, the process is very time consuming as well as it is expensive. Let alone for this reason only, there are only a few semiconductor chip manufacturers in the world. And, all those manufacturer companies are running at their full capacity in this current date. Well, now you might have questions like why is it difficult to set up a new semiconductor manufacture industry. Well, the answer is that, it takes huge amount of investments let’s say in billions. In addition, it takes years of planning before adding a foundries.
Effect on car prices due to shortage of chips
Over the past few years, it is been seen that the shortage of semiconductor chips has become directly proportional to the shortage of new cars. A lot of small automobile manufactures have to shut down their production also. A shortage in supply of new cars in the market means the manufactures can sell the cars at a higher price than the MSRP (manufacturer’s suggested retail price), but the users can get the advanced benefits with buying the new car. After understanding the reason behind the shortage of car chips in the automobile industry and issues faced by the manufacturers, you have the opportunity to book your car with the advanced features.