Processor shortage disrupts car production worldwide

In 2020, coronavirus and the resulting lockdowns brought virtually all car production to a halt for many weeks. In 2021, however, it is the shortage of processors and semiconductor components that is causing widespread disruption to vehicle manufacturing lines.

Modern cars need processors and semiconductor components just as much as they need tyres in order to operate properly. These tiny electronic “brains” are essential to everything from engine management and infotainment to driver-assistance systems.

There are several reasons why this processor shortage is now occurring.

When the pandemic forced most factories to shut for weeks during the first half of 2020, car manufacturers also cut their orders for a range of parts, including processors. What the automotive industry did not anticipate was the market’s strong recovery in the final months of 2020.

As demand rose suddenly, car makers rushed to place fresh and larger processor orders. However, processor manufacturers - largely based in Asia - were simply unable, and remain unable, to meet those requirements.

This is mainly due to higher processor output for computers and games consoles. The pandemic can be “blamed” for this as well. With many people now working from home, purchases of IT equipment increased across the board, while the launch of consoles such as the PlayStation at the end of 2020 pushed processor makers to the limits of their manufacturing capacity.

More than 100 semiconductor components per car

The automotive industry is now experiencing shortages of processors and a range of semiconductor components across much of the world. Several manufacturers have already had to lower the production rate on their assembly lines.

Toyota, for instance, had to stop a production line in China, while the now Stellantis did the same in Mexico and Canada, and Ford in the United States. Europe is no different. Honda had to suspend operations at its Swindon factory in England for several days; Audi placed 10 200 employees on reduced working hours at its Ingolstadt and Neckarsulm plants; and Opel made a similar decision at its Eisenach factory.

Daimler has also begun taking action to address the processor shortage at several of its German factories. Measures range from putting staff on reduced working hours to cutting each work shift by 30 minutes in Bremen.

According to several reports from within the industry, there is still no end in sight to this crisis involving shortages of processors and semiconductor components. As cars now contain more than 100 semiconductor components, the absence of just one is enough to halt production of an entire model. Some processor manufacturers have already announced additional investment in production to meet demand, but it may take several months before the situation returns to normal.