Semiconductors: What are they and why is there a shortage?

Car manufacturers are currently facing a testing period because of one major component – a semiconductor. Modern cars use more than 1,400 of these ‘chips’ to control various functions and, because of a shortage, carmakers are struggling to meet their production targets.

But what do these chips do and why is a shortage a big deal? Let’s take a look.

So a semiconductor controls aspects of a car’s makeup?

That’s right. These computer ‘chips’ are used throughout a car and help to control aspects such as the infotainment and main screens, as well as important components like the power steering and brake sensors. Parked a new car recently and used a reversing camera? That wouldn’t work without a semiconductor.

Are semiconductors used elsewhere?

Absolutely. Semiconductors aren’t just used in cars but all manner of electronic devices. Phones and games consoles are just two products that rely on semiconductors to work properly.

Why is there a shortage of them?

Skoda factory
(Skoda)

A lot of the issue resides around the coronavirus pandemic. With fewer people buying cars, manufacturers ordered fewer chips. In contrast, tech firms producing games consoles and phones were buying up semiconductors as quickly as they could. When car production began to restart, the manufacturers were at the back of the line for new semiconductors – and that’s where the problem started.

As the number of semiconductor producers is relatively limited, it means there’s a real bottleneck when it comes to demand.

But what does this mean for new cars?

Essentially, it means delays. Many manufacturers, including Jaguar Land Rover, Mini and Renault – as well as the wider Stellantis group – have had to slow production to compensate for this chip shortage, which in turn will mean that cars will take longer to arrive.

It might mean that you have to wait longer than usual for your new car.

Will it affect used cars?

Indirectly, yes. Because lead times for new cars will be longer, it could mean that the demand for used cars will increase.

Jim Holder, editorial director of What Car? told Car Dealer earlier this week that buyers are flipping their purchases into the used market.

He said: “We are hearing about the nearly new market hotting up.

“Our weekly polling of car buyers tells us that demand is strong, and that buyers who can’t get the car they want are willing to either buy nearly new or swap to models or brands with availability at increasingly high rates.”