On Friday, February 26, 2021, OESA (Original Equipment Suppliers Association) hosted a webinar analyzing the impacts of the global semiconductor shortage on the automotive industry. The program kicked off with a presentation from Jérémie Bouchaud, Director E/E & Semiconductor, IHS Markit entitled, “Chip Shortage: Don’t We Ever Learn?” He shared his view that the chip shortage was not unexpected. He then walked through what he saw as some of the fundamental issues driving the chip shortage:
In Mr. Bouchaud’s view, the consensus among the experts is that the impacts of the global semiconductor shortage will get worse before they get better unfortunately. Orders to TSMC (the #1 semiconductor foundry) that were placed in November 2020, will not result in wafer delivery until September 2021. So Mr. Bouchard noted that it is easy to see how issues will compound throughout 2021. Although efforts are being made to apply political pressure, he cautioned that it is important to keep in mind that the automotive industry represents a mere 3% of semiconductor revenue.
Second in OESA’s lineup were Julie Fream, President & CEO of OESA, and Ann Wilson, Senior Vice President, Government Affairs of MEMA (Motor and Equipment Manufacturers Association). They detailed their advocacy efforts in Washington, D.C. to address the semiconductor shortage.
As an initial matter, in early January 2021, they met with a number of OEs to discuss the shortages and challenges facing the automotive industry and communicate what was happening in the supply base. In these meeting with OEs, they stressed the importance of communication with the entire supply base—and not just those suppliers directly sourcing chips.
They also have been working on various advocacy efforts in Washington, D.C. and noted President Biden’s recently issued Executive Order on supply chains. This will focus on longer-term considerations regarding semiconductors and impacts on the automotive industry.
They closed by stressing that the automotive supply chain appears to be the most fragile that has ever been with impacts from shortages in semiconductors, steel and resin, as well as the recent issues in Texas and ongoing port delay issues. Next steps include:
The final presentation was by Joe Langley, Associate Director, IHS Markit regarding The Semiconductor Shortage and the Impact on the 2021 Production Forecast. Mr. Langley notes that for the first quarter of 2021 alone, there have been over 1 million units worldwide that are estimated to have been lost due to the semiconductor shortages. He further expects a downward revision for the second quarter of 2021, as well as the third and fourth quarters of 2021. Across North American OEs, as well as European and Asian OEs, there are lines down and reduced shifts. He explained that the “Restocking Phase,” which originally was expected to take place in the first part of 2021, now will be much later. He predicts that automotive will be trying to catch up throughout all of 2021 and even into 2022.
The consensus from the OESA presenters appears to be that the situation will improve in 2022. The experts further agree that in order to mitigate future risks regarding semiconductors and other critical component or material shortages, volume commitments and risk allocation will need to change across the automotive industry. These types of changes will need to be driven by commitments from the OEs.