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Computer Chip Shortage May Be the Start of Challenges for Auto Suppliers

Bill Koenig
By Bill Koenig Senior Editor, SME Media

An ongoing computer chip shortage may be the beginning of challenges for automotive suppliers, consulting firm Deloitte said in a report.

The industry’s shift toward electric vehicles means supply chains for other materials and goods may tighten, according to the report.

Among the items vital for EV production are commodities such as lithium, cobalt and nickel. 

“The semiconductor crisis could be a harbinger of things to come,” Raj Iyer, managing director of Deloitte Consulting, said in the report.

“A resulting material constraint would have a knock-on effect on an entire emerging segment that would keep prices high and further limit EV market penetration,” Iyer added. “To position their businesses for success, automotive suppliers need to make decisions now about whether to expend or defend their current positions, or pivot to something new.”

The consultant said, “By taking stock of where their raw materials are sourced and maintaining sufficient distribution strategies automotive suppliers can help avoid severe commodity restraints that could damage already strained automotive relationships.”

The report examines trends affecting suppliers. In addition to the move to EVs, Deloitte’s analysis included these points:

--To avoid or alleviate future computer chip shortages, “auto manufacturers are looking to renegotiate for longer contracts and direct partnerships with chip suppliers.” 

--Auto suppliers “could consider retiring obsolete technologies. This involves updating aging information technology systems and investing in greater data transparency to benefit the complex relationship between multiple tiers of parts suppliers and their vehicle manufacturer customers.” 

--The auto industry faces a “war for talent” for software developers and data engineers to support increasing EV output. 

Deloitte said suppliers may need to consider “strategic consolidation, acquisitions and alliances” to “better protect margins and diversify risk across growing, stagnant and declining supplier sectors.” 

“As a result of the pandemic, automotive suppliers have learned how to operate leaner and should continue to remain flexible to shifting economical, geopolitical and logistical issues,” Jason Coffman, U.S. automotive consulting leader and principal of Deloitte Consulting, said in the report.

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