The Computer Chip Shortage Isn't Just Affecting the Ford Bronco, Though it May Seem Like It
Because of its direct effect on the automotive industry, we’ve been hearing quite a bit about the recurring computer chip shortage. Like a number of issues that have cropped up over the past year and a half, it was expected to be relatively short-term — something that would be quickly rectified once production regained full steam to catch back up with demand.
The continuing effects on the Bronco seem particularly severe — Ford’s heralded new SUV has actually been plagued by a variety of production issues, but it seems the Bronco has been especially hamstrung, with literally thousands of buyers standing by to take delivery of their eagerly awaited vehicles. And of course, with the surprising success of Ford’s new Mustang Mach-E also causing an additional lag between orders and output, it appears that Ford is especially snakebit by the computer chip shortage, which many experts are now saying could last well into 2023.
The only apparent silver lining for Ford dealers — who can’t possibly take full advantage of the feverish demand for the Bronco, as well as the Mustang Mach-E and the Raptor because they simply have no way to get their hands on enough inventory — lies in the profit margin they are able to enjoy on the precious few vehicles they do have in stock. There isn’t much inventory to be had, but we’ve seen some incredible markups take place — some dealers have been so excessive in this regard that Ford is in the process of re-thinking its entire sales strategy.
Is Ford Being Hit Particularly Hard by the Computer Shortage?
It sure seems so. And there’s a tangible reason for this. For starters, the demand for the new Bronco has been greater than expected from the start and this demand, which has been further fueled by a series of very positive reviews by the automotive press, would have likely led to limited availability of Broncos, even without a shortage. Factor it back in, even before a substantial number of the SUVs have had the chance to reach their owners’ garages, and you have a definite prescription for frustration stemming from sheer unfulfilled anticipation.
At the same time, the unexpectedly enthusiastic response to the Mach-E has amplified the negative impact on Ford. While any of today’s cars are going to be more dependent on computer chips than their predecessors — simply out of their growing electronic complexity — electric vehicles (EVs) like the Mach-E are particularly dependent and the growing use of driver assist systems is stoking the demand for computer chips even higher.
As a net result, in the Mach-E, Ford has a second eagerly awaited release that’s been at least partially sidelined. Ford workers had already gotten nearly to the end of the assembly process for quite a number of the electrically-powered SUVs, and will continue to build more while they wait for more chips to become available.
Interestingly, it’s actually the electronic intricacy of the Ford Bronco, as well as many of today’s other automotive offerings, that makes the industry so susceptible to this shortage. Lower end memory chips are still fairly plentiful and even those chips used in image sensors are generally available. It’s the higher end chips — just the type that Ford and other manufacturers need most — that are so scarce.
The net effect on the automobile industry as a whole has been monumental —the consulting firm AlixPartners estimates that the semiconductor chip shortage will ultimately cost the industry in excess of $110 billion in 2021 revenue and a number of other sources say it had already decreased the total number of vehicles that would otherwise have been manufactured by nearly three million units through the first two quarters of 2021 alone.
While the timing of the Bronco’s release as well as our own affinity for the model have amplified the severity of the perceived effects of the chip shortage for Ford, to be fair, General Motors, Tesla, BMW and Daimler have also felt its wrath to varying degrees of late. There have even been reports that Tesla may eventually build its own chip factory to ensure that the company won’t be handcuffed by another crisis like this in the future.
Is the Semiconductor Chip Shortage Due Solely to the COVID Pandemic?
There’s no question that the pandemic is the most directly related cause of the current shortage, but there have been other contributing factors as well. At the very beginning of the pandemic, chip manufacturers shifted their available production capacity to the gaming industry, which has thrived ever since things got serious in March of 2020.
Who doesn’t love isolation more than hardcore gamers, after all?
The manufacturers haven’t since fully redirected their efforts to the automotive industry, but the severe winter storms that plagued Texas in February 2021 temporarily shut down two different chip assembly plants that are operated by electronics behemoth, Samsung. Adding to the damaging effects of the pandemic were a disastrous fire at the Tokyo-based Renesas Electronics plant, which is also a pivotal chip manufacturer, as well as a severe drought that curtailed automotive semiconductor chip production in Taiwan.
What Are the Prospects of Another Shortage in the Future?
Without substantial action to increase chip capacity in the future, unfortunately the chance of another shortage in the future is appreciable. The ever-increasing amount of electronic data produced each year — some estimates are that this number actually doubles every two years and has been doing so for quite some time — means that a commensurate supply of chips is needed just to keep up.
Ramping up capacity will be no overnight task. In a recent Washington Post interview, Intel CEO Pat Gelsinger said, “I think this is a couple of years until you are totally able to address it,” he said. “It just takes a couple of years to build capacity.”
Nevertheless, raising chip production capacity has become a top-tier priority, as the current shortage has underscored. So much so that the infrastructure package recently passed by the Senate contains an estimated $50 billion earmarked for the American semiconductor industry.
Here’s hoping it will be used wisely.