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Semiconductor shortages will cost the automotive industry $110 billion dollars this year and reduce vehicle production by nearly 4 million units, almost double what was forecast in January, according to a study released Friday by the firm AlixPartners.
AlixPartners had forecast in January that chip supply problems due to the pandemic would cost the industry $60.6 billion this year, but the worsening situation, with a fire at a semiconductor production plant in Japan and poor weather conditions in Texas have led to further problems.
The firm estimates that the lack of chips that are part of various vehicle systems, from airbag and brake control modules to infotainment systems, will reduce global vehicle production by 3.9 million units, compared to the 2.2 million it predicted in January.
The production of a vehicle today needs up to 1,400 chips and semiconductor production plants are running at full capacity right now so it will take months for the industry to get back to normal.
“These chip plants are running at full capacity. There’s nothing to cushion the impact, there’s no additional capacity, there’s no inventory,” stated AlixPartners managing director Dan Hearsch.
Hearsch added that the situation will only start to improve by the end of the year: “In the third quarter there will be enough to get everyone up and running to a greater or lesser extent. By the fourth quarter, we should be fine and next year we’ll be back to normal, hopefully,” he explained.
In the United States, major automakers have been forced to cut production and temporarily lay off workers because of the lack of chips.
Ford has warned that supply problems will cost it $2.5 billion this year, while General Motors (GM) has estimated the impact at between $1.5 billion and $2 billion.