CAMBRIDGE, UK – A massive shortage of semiconductors across all categories, according to some industry executives, is having a profound impact. The power electronics industry is underpinned by a transition toward new semiconductor technology, and even without this, drives demand for semiconductor content per electric vehicle roughly 2.3x that of cars with internal-combustion engines.
In 2020, new car sales were down approximately 15% year-over-year, driven by changing consumer needs around travel, job uncertainty, and factory closures during lockdowns, according to new research from IDTechEx. The problem is semiconductor foundries need to operate as continuously as possible due to the fallout from interruptions and long startup times, which last weeks to months and eat into profits. Inevitably, while automotive demand waned in 2020 and automakers postponed or canceled orders, the slack was quickly redirected to other sectors and has not been so easy to channel back.
In 2021, demand from other sectors such as smartphones, cloud computing, or data mining hasn’t waned, and the crisis has been deepening with lead times for parts like microcontrollers reaching as high as 44 weeks.
In April, Ford said it would sell 1.1 million fewer vehicles due to the shortages, and last month, Toyota, which had been coasting on reserves, also reduced production, the research firm says.
Most computer chip production is outsourced to foundries in Asia, where Taiwan Semiconductor Manufacturing Company has close to 60% market share based on revenue. The lack of companies capable of manufacturing chips, and long lead times to switch between suppliers, means automakers are stuck.
Unlike the global auto market, electric vehicle sales grew consistently throughout 2020, with about 40% year-over-year growth. By 2022, with current trajectories and assuming no supply constraints, IDTechEx estimates electrification in the automotive sector will demand an additional $7.4 billion worth of semiconductor material compared to a scenario without electrification.
However, while electric vehicles are a massive growth sector for the semiconductor industry, growth is driven by power electronics, while current shortages are mainly affecting microcontrollers. Moreover, the continued growth of electric vehicle markets through 2020 means it is less likely automakers canceled EV parts, at least to the same degree as internal combustion cars, and electric vehicles were able to sidestep some of the brunt of the impact.
Tesla claims it has largely managed the crisis in 2021 by building new microcontroller designs and changing microcontroller suppliers. Its sales have remained strong. Less established EV startups are having a harder time but tend to operate in premium or other low-volume sectors. For example, Nikola has delayed the release of its FCEV vehicles, but this is a loss of under 100 units in 2021.
Electric vehicles markets will be impacted, but IDTechEx does not think they will stop growing. IDTechEx believes gradual improvements will occur through 2022, which largely depends on demand from phone/laptop/home-office tech sectors cooling off, rather than long-term capacity expansion plans from foundries.