Global Business Challenge:

Semiconductor Shortages in
the Automotive Supply Chain

Understanding the impact and solutions

ALOK KUMAR S004

APOORV SARVESH S010
ASHWANI RAJPUT S017
PRABAL PRATAP SINGH
S066 GROUP
VIKAS JHA S104 S6
Overview
• Role of semiconductors in Automotive Industry
• Causes of semiconductors shortages
• The impact on automotive OEMs
• Role of Countries and Governments
• Steps taken by stakeholders
• Lessons from the crisis
• Key takeaways from GBM perspective
• Recent developments
• Conclusion
Role of semiconductor in Auto
Industry
The automotive industry operates within a highly interdependent and
globalized supply chain, built on the principles of efficiency and just-in-
time manufacturing.

Why Semiconductors are Critical:

• Core to modern vehicles, enabling functionalities like engine control,

braking systems, infotainment, and advanced driver assistance systems
(ADAS).
• Essential for electric vehicles (EVs) and autonomous driving, requiring
2-3 times more semiconductors compared to internal combustion
vehicles.
• Each car typically uses 1,500-3,000 semiconductor chips, and EVs are
at the higher end of this spectrum.
• With the automotive sector aiming towards more reliable, efficient, and
safe cars, the incorporation of semiconductors chips in a car ranges in
between 1000 – 3500.
• New types of sensors, such as enhanced lidars and smart cameras etc.
are being incorporated into newer cars which are based on advanced
semiconductor chips, which ensure maximum efficiency.
Role of semiconductor in Auto
Industry
Semiconductors play a critical role in modern automobiles with a variety of
functions, including:

• Safety Semiconductors are used in a variety of safety functions.

• Electrification:- Semiconductors are essential for controlling the
powertrain and battery in electric vehicles (EVs). They also control the
flow of electrical energy between the battery pack, electric motor, and
other components.
• Communication and connectivity:- Semiconductors are used in a
variety of communication and connectivity functions.
• Suspension and transmission control :- Semiconductor chips help
the vehicle adjust its performance based on driving conditions.
• Touchscreens:-Semiconductors are used in the variety of touchscreens
that are installed in the driver's dash and in the back of passenger
seats.
• Semiconductors are the building blocks of most electronics. They
process data, power screens, and manage battery life.
Causes of semiconductors
shortages
Early factory shutdowns disrupted global semiconductor
Pandemic production. Automotive OEMs reduced chip orders, predicting
lower vehicle demand, while electronics manufacturers ramped
Impact: up orders to meet work-from-home demand. The supply-demand
imbalance led to prolonged shortages.

Global reliance on a few key players:

Structural • TSMC and Samsung : Combined control over 70% of global
Issues: production.
• Automotive-grade chips form a smaller portion of their
production portfolio, leading to lower prioritization

U.S.-China trade war and export restrictions caused companies to

Geopolitic stockpile chips, further reducing supply.
al Factors: Concerns over Taiwan’s political stability heightened risks.

Logistical
Global shipping delays, raw material shortages (e.g., silicon
Challenges wafers), and port congestions exacerbated issues. Distribution of global semiconductor
: fabricating capacity
Causes of semiconductors
shortages
1. Recent surge in demand of semiconductors is due to growth of
electric vehicles (EVs), increasing connectivity, and the rise of
autonomous driving technologies.
2. The COVID-19 pandemic disrupted global supply chains, leading
to factory closures and logistical challenges.
3. The sudden surge in demand for consumer electronics, as people
adapted to remote work and digital lifestyles, further strained
semiconductor manufacturing capacity.
4. Geopolitical tensions between the US-China and Japan-Korea and
natural disasters, such as the recent earthquakes in Japan and
Taiwan, have disrupted semiconductor production.
5. Renesas Naka factory in Japan faced an earthquake and a
building fire consecutively in the months of February and March
in 2021.
6. In February of 2021, the Texas winter storm Uri caused
widespread power outages and rolling blackouts disrupting the
chip supply chain.
7. An ABF shortage was exacerbated after a fire impacted
production for Japanese manufacturer Nittobo in July 2020.
8. A fire broke out at the Asahi Kasei Microdevices (AKM)
semiconductor plant in Miyazaki, Japan, in October 2020, that
The Impact on Automotive OEMs

Immediate Case Studies: Ripple Effects:

Effects:
Production delays leading to
Ford: Reduced production and
Shift in consumer preference
eliminated some features. Focused
halted assembly lines and towards used cars, driving up their
on producing high-margin vehicles
unmet vehicle demand. prices globally.
like trucks and SUVs.
Global losses in the automotive Pressure on dealers to meet demand
Toyota: Initially weathered the
industry exceeded $210 billion with limited inventory.
crisis better due to its stockpiling
in 2021 alone.
strategy but faced challenges by
Inventory shortages, extended Companies began reevaluating and
late 2021.
delivery times, and rising restructuring their supply chains to
Volkswagen: Reconfigured build resilience against future
vehicle prices.
production schedules, reducing shortages
output in less profitable markets.
The Impact on Automotive OEMs

Production Inventory
Cuts shortage

Price Rise/
EV Delay
Supply
chain
disruption
 Role of Countries and
Governments
Key Players in Semiconductor Manufacturing:
• Taiwan (TSMC): World’s largest contract chipmaker, supplying most
automotive-grade chips.
• South Korea (Samsung): Leading in memory and logic chips.
Government Interventions:
United States:
• CHIPS and Science Act: $52 billion investment to incentivize
domestic manufacturing.
• New fabs announced by Intel, TSMC, and Samsung in the U.S.
European Union:
• European Chips Act: Targets doubling global semiconductor output from
Europe by 2030.
• Focus on advanced chips for automotive and renewable energy sectors.
India:
• Launched "Semicon India" initiative with a $10 billion fund to attract Lloyds’s & wtw report Loose connections: Rethinking
chipmakers. semiconductor supply chains

China:
• Accelerated investments in domestic semiconductor capacity to reduce
dependence on imports, especially from the U.S. and Taiwan.
Role of Countries and
Governments
Geopolitical Conflicts and Strategies:
• U.S. vs. China:
o U.S. export restrictions on advanced chips to China
under the Biden administration have tightened
supply chains.
o Potential implications of a Trump presidency return:
Likely exacerbation of trade tensions, stricter tariffs,
and heightened export controls.
• Taiwan Tensions:
o A potential flashpoint for global semiconductor
disruption, as TSMC accounts for over 50% of
advanced chip production.
o Efforts by the U.S. and allies to reduce dependency
on Taiwan by incentivizing regional manufacturing
hubs.
• India's Balancing Act:
o Strategic partnerships with the U.S. while
maintaining economic ties with China.
 Steps taken by stakeholders
• Short-Term Adjustments:
• Collaborating closely with chip manufacturers to secure supply.
• Temporary suspension of certain models to prioritize high-demand, high-
margin vehicles.
• Simplification of vehicle designs by reducing non-essential features.
• Long-Term Strategies:
• Vertical Integration:
o Example: Tesla’s in-house chip design capability, reducing external
dependency.
• Supply Chain Diversification:
o Sourcing from multiple regions and engaging with secondary suppliers.
• Strategic Partnerships:
o OEMs forming alliances with chipmakers to ensure dedicated production
lines.
o General Motors has signed a long-term agreement with Global Foundries
to establish the exclusive production capacity of U.S.-produced
semiconductor chips.
o Bosch buying key assets of TSI Semiconductor’s chip production
facilities in Roseville, California to boost the range of electric vehicles.
• Technology Adoption:
o Adoption of AI-driven demand forecasting and blockchain-based supply
Lessons from
the Crisis
• Strategic Resilience:
• Need for buffer inventories and alternate
supplier networks.
• Global Collaboration:
• Encouraging partnerships across industries
and governments to mitigate risks.
• Technological Evolution:
• Integrating digital tools (e.g., predictive
analytics, digital twins) for better visibility.
• Risk of Regional Dependence:
• Reducing reliance on Taiwan and South
Korea by investing in regional hubs globally
Key Takeaways from Global
Business Management
Perspective
• Interdependence and Vulnerabilities:
o The semiconductor crisis underscores the fragility of
global supply chains, highlighting the need to address
over-reliance on a few regions like Taiwan & South
Korea.
o It is essential for businesses to evaluate the trade-offs of
efficiency versus resilience in their supply chain
strategies.
• Importance of Strategic Planning:
o Scenario planning, stress testing, and risk assessments
are critical tools for anticipating disruptions and
developing robust contingency plans.
o Organizations need to focus on creating agile supply
chain systems that can quickly adapt to changes.
• Role of Innovation:
o Embracing advanced technologies such as AI-driven
demand forecasting, blockchain for transparency, and
digital twins for simulation can strengthen supply chain
resilience.
o Vertical integration, as demonstrated by Tesla, provides a
model for reducing dependency on external suppliers.
Key Takeaways from Global
Business Management
Perspective
Global-Local Balance:
o Striking a balance between globalization and
localization is crucial to minimize risks while reaping the
benefits of international trade.
o Investments in nearshoring and distributed
manufacturing hubs can help mitigate future
disruptions.

Geopolitical Awareness:
o Understanding & navigating geopolitical dynamics, such
as U.S.-China trade tensions and Taiwan's strategic
position, are key for global business leaders.
o Proactive government and industry collaboration can
mitigate risks arising from such conflicts.
 Recent Developments
Developments:

TSMC expanding facilities in Arizona and Japan to cater to growing demand.

Investments in EV-focused chip production by Samsung and Intel.

Rise in partnerships, such as BMW collaborating with Qualcomm for autonomous

vehicle chips.

Headwinds:

Escalating geopolitical risks in Taiwan Strait.

Increasing raw material and energy costs impacting production economics.

Persistent labor shortages and climate-related disruptions in supply chains.

Potential policy shifts under a Trump presidency, including new tariffs and protectionist
measures
Recent News

Lam Research bets big on Karnataka with a

₹10,000 crore investment

Trump prepares to change US CHIPS Act

conditions potentially impacting 39 B $ of
subsidies

Cabinet approves proposal of Kaynes

Semicon Pvt Ltd to setup a semiconductor
unit in Sanand, Gujarat with an investment of
Rs 3,300 crore.

Vedanta to invest nearly $500 million (around

₹4,300 crore) in AvanStrate Inc (ASI), its
display glass subsidiary.
Conclusion
The semiconductor crisis has underscored the importance of resilience, agility,
and collaboration in global supply chains.

Strategic foresight and investments in diversification and technology are

essential.

The Industry must adapt to increasing semiconductor dependency, especially with

the rise of EVs & autonomous vehicles.

Collective global efforts can mitigate future disruptions, fostering sustainable

growth.