Out of the Frying Pan and Into the Fire – Semiconductor Supply Chain Crisis set to Disrupt Automotive Market Through 2021

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By James Hodgson | 2Q 2021 | IN-6158


What Happened?


The automotive industry is in the midst of a semiconductor supply crisis, with April 2021 seeing many original equipment manufacturers (OEMs) continuing to halt vehicle production over a shortage of key semiconductor components. At the heart of the crisis is a weakness in the automotive industry’s procurement processes, exposed by the sudden demand contraction brought on by the COVID-19 crisis in 2020.

At the onset of the pandemic, automotive OEMs across the world cut production—idling plants and cancelling shifts as consumer demand ground to a halt in 1H 2020. With plants and machinery idle, OEMs also cancelled requests for quotations (RFQs) and orders for many components, including semiconductors. The biggest factor driving the contraction demand was revealed to be the complete disruption of the bricks and mortar retail environment—the lockdown effect becoming apparent in the new vehicle sales rebound that coincided with the reopening of dealerships in Europe and North America. Indeed, the new vehicle sales market ultimately performed better than expected, contracting by “on…

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