The demand for semiconductors in vehicles remains a challenge for electric vehicle automakers as the year winds down. It's not just one sector in the changing auto market that requires semiconductors, because the chips are needed for autonomous vehicles, connected cars, and the push toward electrification.
The market is beginning to stabilize but the demand for EVs and other models that demand more semiconductors is only accelerating.
During Q1 2021, around 670,000 vehicles across the world were stuck in the production stage of assembly, according to IHS Markit.
For the entire semiconductor market, there is some level of normalcy returning, but automakers are still left waiting. LG Electronics explains the sophisticated design of semiconductors used in vehicles, and why they're slower to manufacture:
Semiconductors come in two types: memory semiconductors and non-memory semiconductors. Memory semiconductors are mass-produced for each product type and serve as storage, whereas non-memory semiconductors, which is where automobile semiconductors fall under, are made in small batches for multiple product types and services to analyze and process information, adding extra value. Non-memory semiconductors occupy 60 percent of the entire semiconductor market and require advanced design technology, which is why they cost more.
The problem facing automakers is that semiconductor sales for phones, PCs, and other computer components all were able to purchase the chips they needed - and car manufacturers effectively fought for the scraps.
The car lifecycle obviously is much longer than a regular consumer tech product, so automakers were never quick to make changes. Although car companies did appear to learn the lesson and are aggressively following development road maps.
Assuming manufacturers are able to keep up with constant high demand, it will be quite lucrative for those involved. The automotive chip market may see the market grow from $41 billion in 2019 up to $147 billion by the end of the decade, according to research from McKinsey reports.