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What is Causing the Chip ShThough they are barely the size of the coins in your pocket, a shortage of computer chips has brought entire vehicle assembly lines to a halt. Without these chips, today's cars cannot function in the way they were designed. According to a 2021 survey, 93% of automotive suppliers believe this shortage will have a "severe" impact on the industry.

But what's causing this shortage? How long can we expect these delays to last? This post will look at these questions and explore how the chip shortage might impact your daily commute.

Increased Demand

Chips are used in a variety of applications, including computers, smartphones, and other household appliances. In the age of COVID, many people worldwide found themselves working from home, which increased the demand for computer chips to power office equipment and webcams.

In the earliest days of the pandemic, some tech firms were accused of stockpiling chips to meet evolving demands, which left other companies struggling to meet their manufacturing needs. At the same time, chip manufacturing was brought to a halt due to pandemic restrictions, creating a "perfect storm" for supply chains.

Catching Up After COVID

Even after restrictions eased, chip manufacturing has struggled to catch up. Demand remains high, and the shortage that occurred during the COVID shutdown has yet to be fully addressed. The result is a shortage of a variety of consumer goods, including new automobiles.

Cost of Production

Compounding these demands is the cost of manufacturing these sensitive components. Currently, there are two main approaches to chip production, based on the diameter of the circular silicon wafer that gets split into tiny chips.

300mm wafers have become more costly to produce, slowing production times, which has likewise caused an increase in demand for the cheaper 200mm wafers.

This wafer cost is only part of the problem and doesn't address chip factories' limits. As these factories cost billions to build, there is little new production capacity coming online. Simply put, the cost of production has made it difficult for manufacturers to adapt to increased consumer demands.

Supply Chain Delays

The empty shelves at your local supermarket are just the tip of a larger, global iceberg. Supply chain delays are impacting the shipping and distribution of various consumer products, making it harder to get chips into the hands of automobile manufacturers.

Even seasonal delays related to inclement weather have created snags in the logistics process, preventing chips from reaching their destinations.

When is the Chip Shortage Going to End?

The future is largely uncertain, especially since continued supply chain problems are compounding the chip shortage. While some analysts suggest that the situation could last for "months," a representative from Ford Europe has indicated that the shortage could last until 2024.

On the upside, this shortage has meant that the cost of used cars has increased, which could benefit those looking to sell their old vehicle. Of course, if this chip shortage persists, it could make it harder to purchase a replacement.

What the Chip Shortage Means for You

The demands and challenges of chip manufacturing have only increased because of the global pandemic. Consumers may expect to pay higher prices for new and used vehicles or perhaps delay their purchase until the shortage begins to resolve.