No sector has been hit as hard by the chip shortage as the auto industry. This has resulted in approximately 18 million fewer vehicles being produced worldwide. European automakers in particular are being hit hard. The semiconductor crisis will cost the car industry in Europe about 100 billion in 2021 and 2022, according to credit insurer Allianz Trade.
The car industry has partly brought the problems on itself, according to the credit insurer. “To absorb the corona blow, car manufacturers made significant cutbacks. Among other things, by minimizing stocks and orders for semiconductors. As a result, chip manufacturers sought refuge elsewhere and geared production to strong markets such as computers and data centers. When the car market picked up again, only a limited amount of chips were available for the car industry," says Johan Geeroms, Director Risk Underwriting Benelux at Allianz Trade.
Vehicle production in Europe fell to an unprecedented low of 13 million vehicles. After signs of recovery at the end of 2021/beginning of 2022, production was again slowed down. This time due to supply problems due to ongoing lockdowns in China and the Russian attack on Ukraine.
“Upside potential”
Geeroms: “According to our calculations, the chip shortage in 2021 and 2022 in Europe cost almost 100 billion euros in added value. On the positive side, historically low inventory levels at retailers seem to indicate great upside potential for the automotive sector.” Although Geeroms immediately adds that the supply of chips in Europe will remain an uncertain factor for a long time to come.
Invest in your own chips
Earlier this year, the European Commission decided to set aside tens of billions to stimulate its own chip industry. “Europe should not think that it will be able to produce enough chips on its own within five or ten years to fully meet its own demand. It is better to focus European support on achievable objectives. Then you have to look at products for which Europe itself is both a large production and end market. The car industry is a prime example of this. Our own chip production should focus on that.” According to Geeroms, it is also advisable to enter into joint ventures with major global chipmakers.
Three boosters for extra chips in cars
There is no doubt that the use of semiconductors in cars will only continue to increase. The credit insurer mentions three developments in this regard:
- Connectivity: chips that connect to the manufacturer's network, drivers' phones (bluetooth), etc.
- Safety: motion sensors, blind spot detection, etc.
- Electrification: Electric cars have twice as many semiconductors as cars with a combustion engine.
600 euros in chips per car
Finally, Geeroms: “If we add up the value of all the chips in a car, we arrive at an average of more than 600 euros, worldwide. That value has more than doubled in the past 10 years. That trend will only continue.”
