The global automotive industry thought the worst of the Chip Shortage was behind it. After the pandemic disrupted supply chains and halted production lines, many believed the semiconductor crisis would ease with time. However, a new phase—often called Chip Shortage 2.0—is emerging, and it is fundamentally different. This time, the problem is not temporary. It is structural.

Today, the Chip Shortage continues to affect automakers worldwide, especially in the segment of mature-node semiconductors. This is not the latest technology in smartphone chips or AI chips, but it is the technology that powers today’s cars. Despite the advances in technology, the need for such chips keeps increasing at a higher rate compared to the production, hence an imbalance in the industry.

Insight into the New Stage of Chip Shortage

The previous stage of chip shortage was due to factors resulting from the COVID-19 crisis. Lockdowns, factory closures, and sudden changes in demand created chaos in supply chains. Automakers cancelled chip orders during the early months of the pandemic, only to face severe shortages when demand recovered quickly.

Unlike the previous stage, the ongoing Chip Shortage has more underlying factors. Despite supply chain normalization, the demand-supply gap persists. The automobile industry now competes against other industries for the same semiconductors, creating complexities in the ongoing chip shortage.

Why Mature Nodes Are at the Center of the Chip Shortage

In order to comprehend the present day Chip Shortage, it is essential to focus on mature-node chips. Mature-node semiconductors are those which have been produced using old methods like 40 nm, 65 nm, and 90 nm. Even though they look very old-fashioned, mature-node semiconductors are very important for cars.

They are used in automotive applications ranging from engine control to braking, sensors, and even power supply. They are durable, cost-effective, and can function in adverse conditions.

Unlike advanced chips, mature-node semiconductors cannot be easily replaced. This is one of the main reasons the Chip Shortage continues to affect the automotive sector.

Rising Demand: Cars Are Becoming Digital Machines

One of the biggest reasons behind the ongoing Chip Shortage is the rapid increase in semiconductor demand within vehicles. Modern cars are no longer just mechanical machines; they are digital platforms.

Features such as:

• Advanced driver-assistance systems (ADAS)
• Electric vehicle (EV) power systems
• Infotainment and connectivity

They have dramatically raised the number of chips per car. With increasing sophistication of cars,semiconductor demand keeps rising.

The increasing complexity guarantees that the Chip Shortage problem will be prolonged.

Cross-Industry Competition Exacerbates the Chip Shortage Problem

An important cause of the Chip Shortage problem is cross-industry competition. The automotive industry is not the sole one to use mature-node chips.

Industries such as:

• Consumer electronics
• Industrial automation
• Telecommunications

also depend on the same types of semiconductors. As a result, automakers are forced to compete for limited supply.

This competition increases pressure on the supply chain and makes the Chip Shortage even more difficult to resolve.

Limited Investment in Mature Nodes

While demand is increasing, however, supply is unable to keep up with such trends. The primary cause is the absence of investments in mature node productions.

The semiconductor industry prefers to invest in cutting-edge technology such as 5 nm and 3 nm chips due to better profit margins. Conversely, mature node production yields little profits and thus is not a favorable investment option.

As a result, there is an existing gap, as demand keeps growing while the supply stays insufficient, thereby driving the Chip Shortage.

Slow Capacity Expansion

While the decision by these firms to increase output is made quickly, the construction of such a facility may take years. Old fabrication plants that produce mature nodes are less likely to be updated.

The expansion of manufacturing for this type of chip will be gradual.

This slow expansion means that the Chip Shortage cannot be resolved quickly, even with increased investment.

Why Automakers Cannot Easily Switch Technologies

A reasonable question may be raised: Why can’t automotive manufacturers move directly to cutting-edge semiconductors?

It is explained by the high costs involved and complex procedures. Moving to new technology involves:

• revising automobile architectures
• long-term certification procedures
• substantial expenditure on R&D

In many instances, mature-node semiconductors would do just fine. That explains why automotive manufacturers resort to older technology and perpetuate the Chip Shortage.

Electrification and EV Growth Add Pressure

The transition to electric cars is yet another important factor contributing to the Chip Shortage. Electric vehicles utilize more semiconductors than internal combustion engine cars.

The demand for these semiconductors is growing fast and putting additional pressure on the supply chain, which is already under immense strain. Actually, the demand for mature-node chips has been growing at a double-digit rate across various industries.

This trend ensures that the Chip Shortage will remain a significant issue in the years ahead.

Geopolitical Risks and Supply Chain Fragility

The global supply chain of semiconductors is very localized in certain geographical areas. Disruption of any kind, either political, economic, or environmental, affects the supply of these chips.

It is now clear that even low-end semiconductors are susceptible to disruptions caused by geopolitical factors. Such disruptions only complicate an already existing problem, the Chip Shortage.

Impact on the Automotive Industry

Impacts of the Chip Shortage are observable within the automobile industry. Companies experienced:

• Production delays
• Temporary halts
• Reduction of vehicle specifications

Several firms have even resorted to designing their cars in such a way that they use less chips or substitute parts. The Chip Shortage has often been a factor behind increased pricing and delivery periods for vehicles.

How the Industry Is Responding

In response to the persistent Chip Shortage, some measures being undertaken by automobile companies include:

• establishing strategic collaborations with chip producers
• boosting inventory reserves
• reconfiguring automobile designs
• developing chips in-house

These approaches seek to mitigate reliance on outside vendors.

The Road Ahead

However, despite all these measures, it is unlikely that the Chip Shortage will disappear anytime soon. The experts believe that the discrepancy between supply and demand will be maintained for the next few years.

It is important to note that the main problem continues to be relevant. The demand for mature nodes is constantly increasing, whereas the growth of supply is relatively slow.

Conclusion

Chip Shortage for Automotive is now at a stage where structural problems have replaced the earlier disruptions. Chips that used to be seen as secure and available in abundance have turned into a vulnerable part of the value chain.

The demand for such chips is set to rise even further as vehicles evolve to become more sophisticated and electric. Meanwhile, investment in chips has been sluggish.

In short, the Chip Shortage continues due to the fact that the global demand for such parts exceeds the current production capabilities of the industry. Until this issue is sorted out, the automobile industry will keep struggling in the intricate and constantly changing world of semiconductors.

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