Global Semiconductor Shortages Could Chip Away At The Auto Sector's Recovery In 2021

As the sophistication of in-vehicle electronics continues to accelerate, the auto industry is increasingly reliant on semiconductor devices as a critical component in automobile manufacturing. The increasing use of semiconductors in cars has enabled a broad suite of new functionalities, including in-vehicle connectivity, driver-assist safety technologies, navigation, infotainment, and battery management systems used in electronic and hybrid vehicles (see "Steady Global Auto Industry And Higher Tech Content Spur Growth In Technology Companies," Dec. 17, 2015). Semiconductor sub-suppliers--foundry partners and packaging manufacturers--had already scaled back capacity investments in 2018 and 2019, when demand was slowing and volumes were flat in most regions. Then, the pandemic-linked auto production shutdown in March and April 2020 led manufacturers to drastically reduce their orders from

...- The ongoing semiconductor shortage adds some downside risks to our global auto sales recovery assumptions for 2021. - Semiconductor companies will have low inventories over the next few quarters due to broad chip shortages, but their revenues and profitability will be relatively unaffected. - The credit impact for automakers appears modest for now, but downside pressures to our volume and margin assumptions persist through 2021. - We expect that this shortage will have a limited impact on supply-chain decisions beyond 2021, but it will heighten our focus on future component disruption as the market turns towards electric vehicles over the next few years. As the sophistication of in-vehicle electronics continues to accelerate, the auto industry is increasingly reliant on semiconductor devices as a critical component in automobile manufacturing. The increasing use of semiconductors in cars has enabled a broad suite of new functionalities, including in-vehicle connectivity, driver-assist...

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