The biggest semiconductor shortage in history is rippling through global supply chains (and has been for months now). The immediate effects have been meaningful and there could be long-lasting implications and changes. There are even greater effects than the impact to supply chains as this has become a hot-button geopolitical issue and a pressing matter of national security. And it has added tension to an already strained U.S. and China relationship, as well as served as a drag on economic growth that is resulting in layoffs.
COVID-19’s spread in March of 2020 caused auto demand to plunge and demand for stay-at-home electronics to soar at the same time. Then, however, when demand quickly snapped back for autos in May (catching both OEMs and suppliers by surprise), already lean auto inventories due to COVID-driven plant shutdowns were incredibly exacerbated. As more chips are increasingly built into modern cars, the auto industry has found itself in an unusual situation with no leverage over the semiconductor suppliers and massive shortfalls that will cause production to not be able to keep up with demand (at least through the first half of 2021).
We walk through the observable effects using SONAR data and commentary from public companies and other participants in the wider automotive industry supply chain.
Obvious and observable effects so far include the negative impact to automotive rail carload traffic and the underperformance of Detroit to the national market in terms of inbound
truckload volumes. Meanwhile, demand for used trucks has soared as a result of the bottleneck in new truck backlogs caused by shortfalls in semiconductors.
Most executives and industry leaders in the automotive supply chain believe that the situation will begin to normalize in the second half of 2021, at the earliest.
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