Automotive chip shortages to continue throughout 2023, industry says

We can expect continued disruption to the global semiconductor industry and, therefore, continued supply chain shortages in the automotive industry throughout 2023, according to a new report in the Financial Times. The head of Onsemi, Hassane El-Khoury, told the paper that "there's nothing you can do now to change 2023" and that "we will be adding capacity every quarter, every month in 2023 to meet our customer demand."

The problem began during the pandemic and its associated shutdowns around the world. These caused automakers to temporarily idle plants due to public health concerns, leading some to cancel just-in-time orders for silicon chips. But as vaccines became available and production restarted, the silicon fabs that would have made chips for automakers had already switched that production capacity to other customers like Internet of Things device makers.

Chip plants are running flat-out to meet demand but have warned that the problem will not be solved quickly.

Consequently, automakers have had to reduce production or even idle certain lines. And in some cases, car companies have shipped vehicles minus certain features due to being unable to source the semiconductors necessary. For example, General Motors has had to revise its plan to build 400,000 electric vehicles by the end of 2023—now it hopes to meet that target about six months late.

And the analysts at AutoForecast Solutions expect that the chip shortage will result in around 3 million fewer vehicles being built in 2023; for context, in 2022, automakers faced a production shortfall of 4.5 million vehicles due to shortages, down from 10.5 million lost vehicles in 2021.

Chipmakers like Onsemi are increasing capacity and building new fabs and foundries, but it's a slow process. There's support from governments worldwide to do so—in August, US President Joe Biden signed the CHIPS and Science Act into law, authorizing up to $200 billion over the next 10 years in grants to the industry, along with an additional series of tax breaks.

But that relief will take some time to show up in supply chains, given lead times ranging from 28 to 52 weeks or more. The FT quotes Infineon CEO Jochen Hanebeck as saying: "I do expect quite a longtime shortage." Stellantis' head, Carlos Tavares, also thinks the problem will continue throughout 2023, and that's bad news for anyone who wants to buy a new car.