Deeply affected by the semiconductor chip shortage, the automotive and consumer electronics markets continue facing uncertainties, but the market outlook is shifting towards recovery. Mitigation strategies, the push for domestic semiconductor fabs, and technological advances in semiconductor manufacturing processes help alleviate supply issues plaguing inventory imbalances.
Leaders in the space forecast positive market trends as the industry moves toward recovery:
To mitigate the chip shortage, companies are exploring strategies such as onshoring or nearshoring. The United States’ CHIPS Act, passed in mid-2022, has led to a multibillion-dollar investment pool to bolster the country's semiconductor manufacturing capabilities and reduce reliance on foreign foundries. Disbursement of CHIPS Act funding began in March 2023, supporting the ramp-up of American manufacturing for mature-generation chips.
Nearly $200 billion of private investments fund over 40 new semiconductor projects in the US. These investments are expected to create over 200,000 direct and supported jobs across the country. Several geographic clusters, including Arizona, Texas, Ohio, New York, Utah, Oregon, and Virginia, are experiencing increased semiconductor fab construction due to incentives and established ecosystems.
While onshoring efforts ramp up, the automotive and consumer electronics industries continue feeling the effects of the chip shortage. Production delays make it difficult to fulfill orders resulting in longer lead times for product availability. Manufacturers make compromises in features and capabilities and delay new product launches, and increased procurement costs from limited availability shrink margins and/or raise costs for consumers.
The automotive industry has been significantly impacted by the ongoing semiconductor chip shortage, which has had far-reaching effects on vehicle production and the integration of advanced technologies. In response to the chip shortage, global carmakers have been forced to adapt by making strategic adjustments like omitting certain features and high-end electronic capabilities in their vehicles.
While the semiconductor chip shortage poses ongoing challenges, the automotive industry has demonstrated resilience and adaptability. Automakers like Toyota have implemented strategies to mitigate the impact of the shortage. Despite the challenges, Toyota achieved a record global annual output of 9.13 million vehicles in 2023, compared to 8.57 million in 2022.
Consumer electronics manufacturers have also felt the impact of the chip shortage, leading to production delays. However, the decline in consumer demand for certain electronic devices, such as PCs and smartphones, contributed to a 7.6% by the top 10 global original equipment manufacturers in 2022.
The chip shortage has disrupted the entire supply chain for consumer electronics, affecting not only manufacturers but also suppliers and distributors. The shortage has created a ripple effect, causing delays and bottlenecks at different stages of the supply chain.
To mitigate the impact of the chip shortage, automotive and consumer electronics manufacturers look to M&A deals and strategic partnerships to secure supply and diversify their sourcing strategies.
Continued growth may rely on alternative technologies or design optimizations to improve yield and mitigate the effects of the shortage.
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