The chip shortage has been the biggest party pooper ever. It is affecting everything from your PlayStation 5 to your brand new BMW. Gone are the days when we used to have those simple Sony and Kenwood stereo systems, these days all cars have a touchscreen infotainment screen and voice commands. While this saves the carmakers money in the long term, as they have to make updates on the software of newer versions of models and display on the same screens, the foibles of this have been exposed by the semiconductor chip shortage that started in 2020 and heavily affected the automotive industry till now in 2022.
Chip and Cars: How did it all start?
We as consumers blame the COVID pandemic mainly for this, but there are a lot of factors that contributed to this chip shortage crisis. For sure, COVID played a part but not in the way we all think. Actually, during COVID the demand for consumer electronics reached a record high.
This includes people heavily buying new laptops, monitors, and other accessories to accommodate working from home. Then at a later stage more gadgets like gaming consoles, TVs and smartphones started to see greater demand.
According to the Semiconductor Industry Association, global chip sales grew more than 8.4% in 2021 compared to 2020. That’s up from the 5.1% growth between 2019 & 2020. That is a headline increase given how large the actual numbers are.
It’s important to note that cars, in general, do not compete with high-tech devices for the same chips. They mainly rely on older chips compared to the ones in your smartphone. Nevertheless, the chip shortage isn’t only for faster chips – it’s across the board. Cars these days are reliant on many small chips and microcontrollers that play a big part in power management, electric steering, automated cruise control and are the brain of your car’s infotainment system.
Having said that, semiconductor chip manufacturers, the likes of TSMC in Taiwan or Samsung in South Korea, get only about 3% orders from auto manufacturers compared to 48% for smartphones for example. So you can understand where their priorities are.
Let’s add a final reason for many others, and it’s the Trump trade war. Yes, President Trump placed restrictions on one of the biggest semiconductor manufacturers in China. The company is (SMIC) limiting it from getting advanced chip manufacturing equipment making it harder for them to produce and sell finished products to any OEMs with ties to the US.
Chip and Wane: How New car sales declined
The effect on new cars, globally and then locally in the UAE as well
Initially the head honchos of car manufacturers downplayed the chip shortage. Nearly every CEO said that they will be able to fulfill the demand for the cars that they will reveal after the pandemic but things didn’t go to plan albeit it did but for the Chinese carmakers. Yes, while every other carmaker started to jostle with the chip shortage, Chinese car manufacturers like Bestune and MG have said that their supply chains have remained unaffected. In MG’s case, the parent company SAIC signed a memorandum of understanding with Shanghai New Micro Technology R&D Center Co., Ltd. Many Chinese car companies have such memorandums meaning they get the chips from these manufacturers on high priority.
For the other carmakers the chip shortage has come at a wrong time. After the COVID pandemic ended, carmakers revealed new cars that they had in the pipeline, and the industry blossomed, only for it to wither again as the companies couldn’t fulfill the demand because of the aforementioned shortage.
Despite launching so many new cars, Volkswagen said that “the global semiconductor bottlenecks particularly impacted” its performance in the third quarter of 2021. Similarly, Stellantis’s chief financial officer, Richard Palmer said, “The level of shortage was slightly higher than we expected in August.” Volkswagen reported a drop off in customer deliveries by 24 percent, General Motors by a third while Ford also saw a 27 percent sales drop.
With the UAE being one of the largest automobile markets across the globe, the demand for new cars was up after the pandemic settled but it could not be fulfilled. Car exports to the UAE and GCC region have been majorly affected by the chip shortage as the whole auto industry lost a whopping $110 billion. The leading carmakers saw an estimated net production loss of 3.9 million vehicle units worldwide in 2021 and that also translated to the cars that reach the UAE and GCC region.
Chip and Charge: Different story for Used Cars
However, it’s not all doom and gloom as the used car market has blossomed in these tough times for the auto industry. As people were not able to get new cars, they started looking at used cars as an alternative.
You see, there will always be someone around the UAE who will be looking to sell their car to buy a new one. This means that the used car market can rarely be disrupted and the demand supply balance is maintained. With new car deliveries taking an eternity, people have turned to the used car market and are looking for low mileage cars.
So is their light at the end of this chip tunnel?
Yes there is. And when it comes to looking for the best used cars for sale in the UAE,we have the perfect tool for the job. You can find certified used cars at the YallaMotor Marketplace.
At our marketplace we have 25,000 cars available for you to choose from in the UAE and our visitors have been increasing by 30% year on year. Every month 1.8 Million people visit our website to see the best used cars and new cars for sale in the UAE. The YallaMotor marketplace will help you find your dream daily and give you a wide array of certified options. Dodging the chip shortage just got easier with the YallaMotor Marketplace.
So, looking to buy a new car but the dealer is quoting a big waiting period? Check the YallaMotor’s used car marketplace to get your dream daily.
Also published on Medium.
