Chip shortages remain the biggest supply chain constraint facing automotive equipment manufacturers, according to an analysis by the U.S. International Trade Commission (USITC).
Today, this problem is considered the biggest constraint to automotive production as a whole.
During 2022, North American light vehicle production was 14.3 million units, up from 13.0 million units in both 2020 and 2021.
Although production improved over the previous year, it remained below the 10-year average of approximately 16.0 million units, primarily due to global semiconductor shortages, as well as other material shortages and supply chain disruptions.
In response to the semiconductor shortage, many vehicle manufacturers were forced to temporarily halt or slow down production.
The loss of production resulting from the shortage was reportedly equivalent to the shutdown of six U.S. automakers for a year.
One analysis estimates that, without the shortage, the United States would have produced 1.5 million more vehicles in 2021 and 355,000 more in 2022.
Despite the recovery of high-end chip supply by the end of 2022, access to legacy chips remains a challenge for the automotive industry in 2023.
Supply chain
The Covid-19 pandemic severely disrupted the market for semiconductors (chips), an essential component of modern vehicles.
At the onset of the pandemic, many vehicle manufacturers cancelled chip orders in anticipation of a significant decline in vehicle demand.
During that time, demand for non-automotive semiconductors increased. Lockouts, telecommuting and distance learning increased demand for computers and other electronic devices, for which semiconductors are a critical input.
In order to meet this growing demand, chipmakers shifted production out of the automotive industry and into the Automotive Sector Rules of Origin of the Mexico-U.S.-Canada (USMCA) Agreement.
This shift was further incentivized by the fact that legacy chips used in vehicles tended to cost less and have lower profit margins than cutting-edge chips used by other industries.
When vehicle demand rebounded faster than expected in the late 2020s, semiconductor manufacturers lacked the capacity to fulfill automotive chip orders from vehicle manufacturers.
The shortage was exacerbated by increased consumer demand for vehicles with advanced technological features, such as infotainment systems and automated parking sensors, which increased the number of chips needed per vehicle.
