MLive: John Taylor on semiconductor supply chain
Don’t expect the usual summer blowouts at your local car dealership, experts in the auto industry advise. The semiconductor shortage is forecasted to impact 3.12 million vehicles globally, and it’s already shrinking inventory on Michigan car lots. Globally, 2.07 million vehicles have been impacted by production pauses, according to the latest AutoForecast Solutions report on April 23. Production volume forecasts estimate a total of 3.12 million vehicles could be impacted in 2021, according to the report. The semiconductor shortage is the latest symptom of the pandemic’s disruption to the global supply chain, but it’s also highlighted a dependency on semiconductor technology.
The chips have become almost as essential as metal in the car making industry. Globally, 33% of semiconductors produced are used for communication devices like cellphones and 28.5% are used for computers, compared to only 12.2% used for auto parts, according to the 2020 Semiconductor Industry Association report. The specialization and the pricing of these chips have benefited from both a lean and global market, said John Taylor, department chair of marketing and supply chain management at Wayne State University. Creating supply based solely on demand avoids excess and inflation and allows for a diversification of products, but it’s not without its vulnerabilities, Taylor said. “It relies on certainty and if there’s not certainty then you run into problems very quickly,” he said. “They’re not resilient enough to deal with uncertainty.” Taylor said he’s hesitant about the push to localize chip production. He’s not convinced it will add more security than it will cost in innovation. Outsourcing globally can also act as a safety net if and when a natural disaster happens in one part of the world. Disruption, to some extent, is inevitable — 2020 was just a particularly disruptive year. “We’ve been hit by a pandemic and fires and geopolitics and unusual surges in demand that have left us in a bad position,” Taylor said.