Semiconductor Shortage Continues to Stymie Economy

Today’s digitally driven world is seemingly consuming more semiconductors than ever, and the consequential shortage has placed a damper on automotive companies around the globe. These digital and processing chips go into everything from smartphones and automobiles to refrigerators and televisions. Basically, anything that’s computerized or uses radio waves utilize these compact, albeit powerful, components of daily life.

The COVID-19 pandemic further aggravated the shortage, as manufacturers’ production suffered disruptions. The lack of availability has further exacerbated the U.S. economy’s inflationary state, as demand continues to soar and manufacturing capacity falls short.

“The chip shortage cost the U.S. economy $240 billion last year, and we expect the industry will continue to see challenges until at least 2024,” Intel CEO Pat Gelsinger said in the company’s recent earnings call.

He cited foundry/manufacturer capacity and constrained availability of key manufacturing tools as factors leading to a lengthier estimate than the previously projected finish line for 2023.

“Intel is rising to meet this challenge,” he said of Intel’s recent series of investments to geographically diversify production. “These investments position Intel to meet the future growth.”

Meanwhile, both consumers and merchants are champing at the bit, as the shortage is realized across the board. The automotive industry is just one of those taking a huge hit. The scarcity of semiconductors has led to plant shutdowns and has sent new vehicle inventories available to dealerships into a dinosaur-like state. Ford Motor Co. is one major automaker that reported a decline in the first quarter, which included a 26% decline in March.

“At present time, incoming vehicles are those that were ordered by customers dating back six to eight months,” said Mark Woodard, who works in new vehicle sales at LaFontaine Ford in Lansing. “There’s no inventory or stock to put on the grounds.”

He added that the only new vehicles available for sale are those that were originally ordered by customers but fell through for various reasons.

“Ford is continuing to convey to us that this year’s third and fourth quarters will start to see a better flow of chips to factories, which should help them to increase production,” Woodard said.

Dealerships are scrounging to fill the gap left in available inventory.

“It’s put us in a position that we’ve had to purchase a lot of preowned vehicles,” said Woodard.

When asked if in his 45 years in the industry he’s ever seen anything like this, he replied, “Never. Never ever have I seen anything like this, especially not on this scale. It’s pretty intense.”