Fitch: Semiconductor shortage stymies automotive recovery

A global semiconductor shortage is disrupting automotive production and may delay a recovery of new vehicle sales and profitability in the sector, according to Fitch Ratings. Increased demand for consumer electronics during lockdowns has led to the global microchip shortage, first reported in December.

Car makers are reducing output and selectively idling plants until the shortage eases, which we expect to take several months. Fitch says some automakers and suppliers may reconsider their supply chains, opting for greater vertical integration and localisation, which could require additional investments.

The situation is particularly acute for automotive companies, which are experiencing a strong increase in electric vehicle demand, while chip-makers often reserve supply for larger technology companies. The shortage is disrupting automotive production in most regions, leading to sporadic slowdowns and selective plant shutdowns, although the overall scale and magnitude of the problem is not yet known.

Fitch says it expects disruptions to continue for several months and to dissipate in H2 2021.

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