The chip shortage and the automotive industry

The chip shortage and the automotive industry

The chip shortage and the automotive industry

While every industry has been affected by the component shortage, the automotive industry has played a unique role in how the shortage has unfolded since early 2020. Changes in demand, a shift in production, and a wave of major purchases have all contributed to the current shortage of components.

A brief background on PCB usage and procurement in the automotive industry.

The average person buying a car can probably name a half dozen major automotive manufacturers without much difficulty. What they may not realize is that these companies don’t make most of the individual components found in their vehicles. The automotive industry is comprised of a massive network of tier suppliers and original equipment manufacturers (OEMs), many of which are virtually invisible to the general public.

Because the automotive industry operates on such a massive scale, they have enough leverage to be aggressive when negotiating price with suppliers. As a result, PCB manufacturers supporting the automotive industry have historically worked with razor-thin margins of profitability.

The average car contains a huge number of PCBs, from the dashboard to the engine compartment. PCBs are used to power digital displays, audio systems, engine and battery control modules, anti-lock braking systems (ABS), and countless other functions throughout the vehicle. And rising demand for electric vehicles (EVs) and autonomous functionality is likely to increase the number of PCBs per car. In 2020, the global market for automotive PCBs was valued at $5.9 billion and is expected to hit nearly $10 billion in 2028.

How the COVID-19 pandemic affected the relationship between PCB manufacturers and the automotive industry

In the early days of the COVID-19 pandemic, car sales dropped, and the entirety of the automotive supply chain was impacted. Like every other supplier in the industry, PCB manufacturers began exploring alternative markets so they could stay in business. That was the moment when things changed dramatically.

Many PCB manufacturers discovered that they could realize a much higher profit by working with other industries. Some scaled their automotive business way back, while others dropped the industry altogether.

Once people started buying cars again, the automotive industry faced a huge problem. Because so many PCB manufacturers shifted their focus away from automotive, carmakers could no longer get the chips they needed to meet demand.

This triggered a massive—and ongoing—wave of panic purchases. Major OEMs are buying up all types of chips by the thousands, without pausing to assess value or future need, in an attempt to buffer themselves from future shortages.

As a result, many PCB manufacturers have announced purchase order caps. Even with these measures in place, chip shortages remain severe, as do production delays. Most industries that rely on PCBs are still struggling to source the components they need. Product availability is extremely unreliable, with units going out of stock every single day. In the automotive industry, car dealers are reporting record-low inventories, and the average lead time on a new car is anywhere from four to twelve weeks.

How to manage the ongoing PCB shortage

The PCB shortage is likely to continue for another two to three years, and automotive is just one of many industries expected to experience ongoing struggles with sourcing.

Whether you’re in automotive or another industry that relies on PCBs, Henway Technologies can help you navigate the challenges of the coming years. We have over a decade of experience designing and assembling PCBs and securing competitive procurement details, even when the supply chain is a mess. Whether you need help sourcing a component or adapting a design due to stock issues, we can help you find a solution.

Talk to a member of our team about custom PCB design and assembly.?

https://henwaytech.com/

Alice Yang

SMT Engineer: My SMT assembly factory $5/1PCS(sample, small bulk orders PCB assembly)

2 年

The logo of your website, like a special fingerprint, is very creative, I like it very much!

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Youssef Mohsen

Semiconductor Procurement | Supply Chain Management | Vendor Negotiation | Technical Specification Evaluation | Supplier Performance Evaluation | Contract Management | Strategic Sourcing

2 年

Interesting article, sourcing PCBs and electronic components has been the most challenging task since 2020.

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