Chip supply mending but not out of the woods

A global shortage of semiconductor chips was the automotive industry’s kryptonite for most of 2021 and 2022. But the crisis is now fading, S&P Global Mobility said Thursday.

The chip shortage cost the industry the production of about 9.5 million light vehicles in 2021, according to S&P Global Mobility estimates, and another 3 million in 2022. In the first half of 2023, production cutbacks tied to chip shortages fell to about 524,000 vehicles. Supply remains constrained, but automakers have been able to adapt production schedules as chip availability becomes more predictable, S&P Global Mobility said.

“We are now in a position where the auto industry has adapted to a constrained supply, and as a result is much less likely to be hit by significant disruption,” Mark Fulthorpe, S&P Global Mobility executive director of global light vehicle production, said in a statement.

Sam Fiorani, AutoForecast Solutions vice president for global vehicle forecasting, said chip supply has improved but warned it can be hard to measure exactly how shortages are still impacting production.

“We’re looking at slowed production globally for many reasons and it’s very easy to hide the semiconductor issue with all the other issues, including other supply chain problems and, currently in North America, a shipping problem,” Fiorani said.

Still, Fiorani said, automakers’ efforts to build closer partnerships with chip suppliers to secure their supply chains and reduced chip demand from other industries have alleviated the worst of the shortage.

“Manufacturers realized they had a problem and have found ways around them,” he said. “We’re not completely out of the woods yet but we’re far better than we have been at any other point in the last two years.”