From phones to fridges, semiconductor chips have become a lynchpin of the way we live and work, and the automotive sector is taking an ever-larger share. Today’s increasingly connected, electrified and autonomous vehicles are all hungry for that processing power and, at the moment, it’s in short supply.
Why is there a semiconductor shortage?
The problem has snowballed. Manufacturing took a hit at the start of the pandemic, as factories were shuttered without warning then re-started with reduced staff and limited capacity. That’s a big problem for the automotive industry, which has a complex supply chain and tends to be light on stock.
Semiconductor supply is particularly fragile. Cautious about durability and safety, carmakers are using what Intel’s CEO recently described as “legacy” technology compared to the consumer electronics sector, and only a handful of facilities make those chips. Two of them were affected by severe storms in Texas in February 2020, a Japanese factory caught fire in April of the same year, and severe droughts in Taiwan have affected another. With the Semiconductor Industry Association claiming it takes six-months (and significant investment) to set up a new production line, there’s no quick fix.
How is the semiconductor shortage affecting fleets?
Semiconductors are a component within a component, so it’s taken a few months for the impact to come to light. At best it’s meant dropping optional extras off price lists, at worst manufacturers have been closing factories to avoid ending up with lots full of unfinished cars. Estimates vary, but IHS Markit says seven million fewer vehicles were built during the first three quarters of 2021.
Fleets, which rely on scheduled vehicle replacements, are facing some real headaches as a result, including:
Delayed deliveries: Factory orders are now taking three to six months to deliver, while vans can take a year. The BVRLA, which represents the UK’s rental and leasing sector, says restricted supply had become its members’ number-one concern.
Missing equipment: Some manufacturers are deleting previously-standard non-essential equipment to keep production going. Ford, for example, recently launched pared-back ‘Design’ editions of the Puma SUV with fewer chips and shorter lead times.
Unplanned expense: Fleets typically budget for specific lifecycles, and many are having to extend contracts to keep employees on the road. This can mean running vehicles beyond their warranty period, with the potential for expensive maintenance bills and disruptive downtime, especially for hard-working vans.