Across Detroit assembly plants are going quiet. If an uptick of Coronavirus cases wasn’t enough in April at local automotive plants, Stellantis NV is planning to temporarily lay off workers at a Jeep plant in Detroit during April and May due to a shortage of semiconductor chips. 

 

So, what is causing this shortage of chips? According to Tom Roberts of Vice president of automotive and mobility sector at QAD in Crain’s Detroit Business “Too many companies increased their orders of microchips at the same time during the beginning of the COVID-19 pandemic. Because of the 14-week lead time, the recurring automotive orders could not be filled. It wasn't that the demand for vehicles, and thus the demand for chips, did not change significantly early in 2020. What the chip manufacturers and the automotive companies missed, or misread, was the demand for chips coming from outside of automotive — demand driven by the pandemic. New generations of smartphones, new gaming consoles and increased demand in IT infrastructure and PC hardware resulting from the fact that many people have been forced to work remotely all drove increased nonautomotive demand for chips.” 

 

The crisis — compounded by production issues tied to the coronavirus pandemic — could result in about 2.5 million fewer vehicles being built this year than planned and level a more than $61 billion hit to the industry, according to a forecast from global consulting firm AlixPartners. 

 

It’s not at all clear how long the chip crisis will last. Many experts suspect chip makers are exaggerating the shortage to wiggle subsidies from the government, and that the crisis could be over sooner rather than later.                

 
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