Global Semiconductor Shortage Poses Threat to Detroit’s Auto Industry

Detroit’s car companies surprised many analysts late last year, as the industry showed signs of bouncing back from the COVID-19 pandemic. However, a global shortage of small electronic parts, referred to as “semiconductors” or “microchips,” could pose a threat to that recovery in 2021.

Analysts say an increase in demand, fueled in part by consumer trends during the pandemic, is the catalyst for supply chain issues. They say as new vehicle production slowed to a halt last spring, the consumer electronics industry picked up the automotive sector’s need for microchips.

“It’s going to be hard to find a single automaker that won’t need to cut back production.” — Paul Eisenstein, The Detroit Bureau

Paul Eisenstein is the publisher of the automotive website The Detroit Bureau. He says many of the same chips used by the auto industry can be found in items like webcams and home computers.

“So now as the (auto) industry has bounced back faster than expected, there is a shortage of this technology and it is not easy to make up for that shortage,” says Eisenstein,

Eisenstein says the issue will be difficult to remedy because it takes months to set up the infrastructure that would allow semiconductor manufacturers to increase capacity.

“It’s going to be hard to find a single automaker that won’t have to cut back production,” says Eisenstein, “Or in some cases even close plants, within the next month or so unless the industry can figure a way around this shortage.”

While assembly lines in Michigan have yet to feel the impact of the global shortage, all of Detroit’s automakers have taken steps to scale back North American plant activity as a result.

Click on the player above to hear The Detroit Bureau’s Paul Eisenstein discuss the impact of the semiconductor shortage on the auto industry.