TECHNOLOGY

Hungry for
Chips
At a time of increasing global demand1, some
remarkable2 occurrences3 have made the process of
getting new wheels4 much more complicated than it
was just last year. BEM’s Michael Gaylord pulled into5
the local auto6 emporium7 to see what all the fuss
was about8.

I
n North America and in many parts dealers. There are even stories of
of the EU, the economy is on the up- people selling used cars for a
swing9 and jobs and salary increas- higher price than they had
es are taking place. A friend of this paid for them.
writer, apparently riding the post-Covid
boom, was excited about having enough
cash on hand10 to purchase11 her �rst new Causes
car in years. Her tastes were simple enough
– she had her eyes on a white VW Golf, Most of the se m-
standard model. However, a wee12 cave- i c o n d u c t o r 26
chips,
at13: it could be weeks, or even months, which are nec ess a ry
the salesperson warned14, before her car for today’s computerised
would be delivered to the dealership15. It
appears that a computer chip16 shortage17 is
to blame18, causing delays19 for dealerships
everywhere.

Consequences of the
Problem
The results of the chip shortage have
been near-catastrophic20 for the auto sec-
tor. Some car factories are shuttered21, and
fewer new cars are entering the market.
Car production in the UK fell by a third
in March of this year, the worst perfor-
mance22 in 13 years. In the US, experts es-
timate that the shortage has cost the econ-
omy USD 240 bln over the past 12 months.
And the dilemma23 isn’t con ned only to24
those who want to buy a new car. Used car
prices have also increased – by as much
as 30 percent (y-o-y25) – according to some

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 TECHNOLOGY
IN BRIEF

operating systemsthey form the basis for

circuit boards27 – in cars, are produced in
Southeast Asia, especially in China and
Taiwan. Covid-19 lockdowns in manufac-
turing centres such as Shanghai have led
to huge drops in production. At the same
time, in the EU and in the Americas, ex-
perts say, not enough of these
chips were stockpiled28 across
automotive production sites 29.
Thus, production has dropped
substantially30. Add to that rapid-
ly31 rising metal and energy pric-
es, supply-chain 32 disruptions 33
caused by the pandemic and the
Russian war in Ukraine, and we and public investment into48 Europe’s semi-
have a perfect storm34 brewing35 for conductor industry. The hope is that the
troubling times36 in the automotive European share of global chip manufactur-
industry. “In the supply chain, the ing will bounce49 from its current one-tenth
lockdowns [in SE Asia] and the war to over 20 percent.
in Ukraine have demonstrated that
we do not have resilient37 and geo-
graphically balanced semiconduc-
tor manufacturing,” Pat Gelsinger,
the CEO38 of Intel, put it succinct-
ly39 in an interview with the BBC.
“Semiconductors are the fuel of in-
novation,” he pointed out40.

What Is Being Done

About It
But is all hope here lost? Perhaps
not. Intel, for one41, said that it was in-
vesting USD 95 bln in opening semi-
conductor plants in Europe and working
towards42 having 50 percent of global semi-
conductor production located in Europe
and the US. Gelsinger indicated43 that this
would “create a balanced semiconductor
supply chain.” Meanwhile, the European
Commission44 came up with 45 the Chips
Act. This stipulates 46 that the EC will
dump EURO 43 bln combined47 private
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TECHNOLOGY

Seriously? How Long Will Challenges

That Take?
These actions may sound encouraging.
A few things could impact successfully However, the situation remains serious,
carrying out50 these ambitions: how quick- for the EU especially, it seems. It has rel-
ly governments implement the acts they atively few �rms (compared to64 the US)
have passed51, how long the war drags that design chips for use in technology
on52 for and whether carmakers53 review54 products. So, not only is it well behind
and revamp55 their sourcing56 strategies. on65 chip production, but it also has to con-
Apparently, some �rms have already be- tend with66 investment elsewhere. South
gun the latter57. “Businesses like Volvo are Korea and China have both poured sub-
getting on the front foot and taking steps to stantial67 amounts in subsidies68 into69 their
ensure they will be insulated from58 [future] own chip-making industries, and, accord-
supply constraints59,” said Josh Nicholls, ing to economists who study the issue, are
a consultant at the supply-chain consul- planning to continue these measures over
tancy60 Proxima. And some have praised61
governments’ relatively62 quick actions.
“Congress (in the US) and the EU Chip
Act showed leadership. I continue to en-
courage [them] to fund critical legislation63
and enable us to move faster toward mak-
ing a balanced semiconductor supply chain
a reality,” said Gelsinger.

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 TECHNOLOGY
IN BRIEF

percent this year. Others, like Gelsinger,

aren’t quite as optimistic. “We expect to
see challenges82 until at least 2024 in areas
like foundry83 capacity84 and tool availabil-
ity,” he said. Stronger demand for high-
end85 cars and strong prices may o�set86 the
lower production, which will at least help
auto dealers recover from87 their early-2022
losses. However, at least for now, it seems,
consumers will continue to pay the price.
That means if you’re in the market for a
new (or even used) vehicle88, be prepared to
fork out89 a few extra grand90 for your new
ride91. Not exactly news that revs up92 your
car-buying enthusiasm. ■

the next decade. “To truly compete70, huge

sums of money are required from both
public and private sources,” Anish Bhatia,
an analyst for Global Data, told the BBC.

Are Better Days

Ahead?
Nevertheless71, the measures taken thus
far72 seem to be going in the right direc-
tion, at least. Recent legislative actions
by the EU propose to double73 the bloc’s74
production. Some manufacturers, both in
the EU and stateside75, have become more
exible76 in terms of77 which components
they are sourcing and are ensuring accurate
forecasting78 takes place. This would help
to deal with future constraints as much
as possible. Also, they are saving chips
in anticipation of79 the next potential cri-
sis. Volkswagen expects the shortage of
the chips to ease80 by late 2022 and pre-
dicts81 their deliveries will rise by about 10

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