The crisis of microchips and the automotive industry

From many industries and the media, voices have been raised regarding the microchip crisis and how it has affected production lines in the technology environment, causing considerable delays with millionaire losses for the affected companies. One of the main causes of this is the monopolization of their production, since the vast majority of the microchips used by companies come from Taiwan, one of the first countries affected by the pandemic.

The closure of vital ports, such as Taiwan, resulted in a delay that affected all industries, including the automotive industry. This, combined with an erroneous prediction by companies regarding a decrease in demand, meant that the automotive industry received a greater impact compared to other industries.

A wrong prediction

Many companies, especially in the automotive industry, predicted that demand would drop considerably for a longer time than it actually did and, as a consequence, demand could not be supplied at the expected rate. This is also combined with the logistical challenges brought by the pandemic, which has made it difficult to obtain the necessary materials for the large-scale production of microchips.

But, although these aspects influenced the delivery times, they are not the main problem that all the industries that use semiconductors face.

The real problem: monopolization

One of the bases of the microchip crisis is the monopolization of this industry. Almost all the chips that companies use come from one country: Taiwan. This has the consequence that, if said country or the company that manufactures them within it were to face any problem, it would delay the production of almost all the products that are used in daily life.

Reuters reports that the United States has made efforts to deal with this monopolization, seeking to encourage chip manufacturing within the same country through an investment of 50 billion dollars dedicated to the production and research of this technology.

Creating a microchip industry that can match the quality and output needed can take years and is therefore a long-term solution.

In fact, JP Morgan predicts that this crisis will continue during 2022 but it is estimated that by the middle of the same year production times will begin to be regulated and, therefore, it recommends investors to opt for long-term options in those trends that depend on semiconductors and microchips as technology-related industries.

The reality that consumers face is that it is a problem that does not have an immediate solution and that raises the costs of products, in addition to delaying production.