The Semiconductor Chip Shortage: The Next Global Pandemic

The Semiconductor Chip Shortage: The Next Global Pandemic

In March of 2020, COVID-19 waged war against our health, the economy, and our entire way of life. Across every industry from retail to dining to construction, businesses were considered lucky to simply survive amidst strict regulations, social distancing, and lockdown measures. The volatile and unpredictable markets led to a plummeting of supply, while some industries maintained or increased demand for their products, including the automotive industry. However, as we now begin our slow return to the normal we once knew, the defensive strategies that auto manufacturers took unknowingly contributed to a new pandemic—the semiconductor chip shortage. 

By May of 2020, RPM, a non-asset-based vehicle logistics provider that moves thousands of finished vehicles a month, witnessed firsthand the plunge in new vehicle sales, the surprising surge of used car sales that followed, and the adoption of online purchases. In April and May of 2020, OEM finished vehicle transportation decreased by more than 70% from the factory to the dealer. The used car market has surged over the past year, keeping many dealerships afloat. However, due to the inactive production lines for many OEMs and their inability to sell new cars to a timid consumer market, auto manufacturers pulled their orders from parts suppliers in an effort to weather the storm. This defensive strategy ultimately led us to where we are today, with a massive chip shortage due to a reactionary delay in coming back online. These microchips are responsible for many critical several vehicle functionalities, including calibrating a vehicle’s fuel injection, running the infotainment system, and cruise control. These chips make a vehicle run. And they make entire industries run.

“A crushing computer chip shortage continues to choke the global supply chain. Automakers are producing vehicles without smart technology—which requires chips—Apple's MacBook and iPad production was reportedly delayed, and the Sony PlayStation 5 consoles are being produced in limited amounts due to the squeeze. It's an effect caused over time by pandemic-driven shutdowns and soaring demand for products that need chips.” – Business Insider. The article goes on to state that the current administration is not only aware of the current pandemic but taking extreme measures to fix the shortage issue. “President Joe Biden is aware of the issue and the threats posed by relying too heavily on foreign manufacturing. As part of Biden's $2 trillion infrastructure plan, there's a $50 billion allotment for domestic chip manufacturing incentives.”

Though the recovery may take some time, once the chips are distributed and vehicles are once again ready to roll, auto manufactures will need a turnkey solution to move the current stockpile of new vehicles out of the factory, VPCs, ports, and railheads. This is where an agile, non-asset-based provider, like RPM, is able to alleviate the supply chain pressures. With minimal notice, we can fill orders on demand—thanks to a robust network effect that leverages 40,000+ independent carriers.

RPM understands the gaps and pain points affecting tier 1 and tier 2 auto suppliers, as well as those further up the supply chain. This allows RPM to provide capacity for our customers’ transportation needs regardless of mode, and alleviate supply chain pressures for suppliers, OEMs, dealers, retailers, and auctions. Our end-to-end experience in the automotive space gives us a unique understanding of industry needs, consumer behavior, and the factors that drive carriers’ business decisions.

If you’re a vehicle shipper looking to source capacity in this tight market, RPM is here to help. Visit us at RPMmoves.com to learn more.

 

Authored by Tom Reid, VP of Operations at RPM

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