The Car Chip Shortage: What You Should Know

By now, you are probably aware that cars are not as easy to come by as they used to be. Several factors can be attributed to the lower inventory levels, but the one factor that lends the most weight to the equation is the car chip shortage. Toyota of Auburn is here to discuss what car chips are, why there is a car chip shortage, and how it is affected both the production of new Toyotas and the automotive industry at large.

What is a car chip?

Before we can discuss why the car chip shortage began, we have to take a minute to explain what a car chip actually is and why it plays such an integral role in the production of vehicles. Here’s what you should know:

Car chips are also known as semiconductors or microchips. They are essentially the brain of all modern electronics – think phones, computers, tablets, etc. – and work as a type of electrical circuit. They are made from silicon and are highly engineered, with a series of transistors that act as tiny switches to control the flow of electrons. The chips vary in complexity and are incredibly versatile – you will find them in everything from new Toyotas all the way down to electric toothbrushes.

They are very, very small. A single chip transistor is 10,000 times smaller than a human hair if that gives you a better idea of how tiny microchips are. The chip shortage began when the COVID-19 pandemic hit, as it slowed production and caused major shipping delays across the globe. Unfortunately, building semiconductor chips is a very complex process. It takes a lot of time and money to do it, and because of that, there are only a few places in the world that produce them. They are churning out as many as they can but are struggling to keep up with demand.

It takes about 12 weeks to build an average semiconductor chip and up to 20 weeks for advanced chips. At this point in the game, the lead time for a chip order is six months. And it is not as simple as just opening new plants to produce the chips – it takes years and billions of dollars to get the production facilities up and running.

What caused the car chip shortage?

OK, so now you know what a semiconductor chip is and what it is used for. Why is there a shortage of these extremely important chips? And why is it hitting the automotive industry so hard? Two main reasons

First, Modern cars use more chips than previous generations of vehicles. There are tons of high-tech features for safety, entertainment, performance, and more in these cars, and each of those features relies on chips to make the magic happen.

Second, forecasting for supply and demand was thrown off by the COVID-19 pandemic. Back in March 2020 – you know, when it hit the fan – shutdowns and quarantines made auto manufacturers think that the demand for new cars would drop. So, they forecasted fewer sales and in turn, canceled orders for car chips. (Spoiler alert: they were wrong. Demand dropped temporarily but bounced right back up.)

When will the car chip shortage end?

How long will the car chip shortage last? No one really knows. Some are forecasting through the middle of 2025, while others think the beginning of 2024 will see a return to normalcy. What we do know is that despite the car chip shortage, we can still help you find a new car at Herb Chambers Toyota of Auburn. We have trucks full of new Toyotas arriving every single day and not only that, you can pre-order your next new car from us and pick it up when it arrives.

Leave a Reply