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Microchip crisis to cost carmakers $110bn this year

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Trucks parked outside a car factory in the US - AP Photo/Jeff Roberson
Trucks parked outside a car factory in the US - AP Photo/Jeff Roberson

The global shortage of semiconductor chips will cost carmarkers $110bn (£78bn) in lost revenue this year, according to business consultancy AlixPartners.

The crisis will hit production of 3.9m cars, the firm warned, as it raised its estimate of the damage from $61bn it calculated when carmakers began to shut factories earlier this year.

Events including a fire at a factory in Tokyo, severe storms in the US and factory shutdowns because of the coronavirus pandemic have led to a global drought of crucial chips, leading manufacturers to prioritise shipments to the most profitable customers such as smartphone makers.

These events “are now major issues for the industry - which, in turn, has driven home the need to build supply-chain resiliency for the long term", said Mark Wakefield of AlixPartners.

Modern cars include about 1,400 semiconductor chips and that figure is expected to keep rising, making the shortage “a critical issue for the industry”, said AlixPartners’ Dan Hearsch.

The warning over the cost of the semiconductor shortage came as IBM’s president said the shortage could continue for two years.

"There's just a big lag between from when a technology is developed and when [a fabrication plant] goes into construction and when chips come out,” Jim Whitehurst told the BBC.

"So frankly, we are looking at couple of years ... before we get enough incremental capacity online to alleviate all aspects of the chip shortage.”

Mr Whitehurst said that IBM was examining ways to reuse chips and said the company will invest in building new factories to help recover from the shortage more quickly.

TSMC, the Taiwanese manufacturing company that is a critical supplier of much of the world’s semiconductor supply, is reportedly considering plans to invest tens of billions of dollars more than planned into increasing production capacity in Arizona.

The company has moved away from plans to manufacture a hi-tech new chip factory in Europe, Reuters reported, but could still create a new factory in the region that is designed to service carmakers.

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