Automakers across the world are shutting down production lines due to chip shortage caused by a combination of the COVID-19 pandemic and U.S. sanctions on Chinese semiconductor companies imposed by Former President Donald Trump’s administration.
Almost all international auto brands, including Ford, Volkswagen, Nissan, Toyota and Chrysler, have been forced to curtail assembly lines since the fourth quarter of 2020. With chip inventory running out, the situation is worsening, according to industrial insiders.
The auto industry was the first to suffer from chip supply strain as automobiles are becoming increasingly software controlled and the industry has become a major chip consumer.
As the single greatest engine of global economic growth, the auto industry directly employs over 10 million people and tens of millions more in vehicle service sectors. In addition, auto industry consumes huge amount of raw materials, including steel, aluminum, plastic, glass, rubber and petroleum, hence a major driver behind these industries.
It is widely believed that President Joe Biden’s administration should review and adjust U.S. policy on China, which is causing global supply chain disorder in not only the auto industry, but also a wide range of others, such as telecommunications and consumer electronic.
The current U.S. administration should avoid a protectionist approach, experts urged.
In 2020, the Trump administration sanctioned a number of Chinese high-tech companies for the so-called “national security” and “clean network” purposes, including semiconductor producers Semiconductor Manufacturing International Corporation (SMIC) and Huawei.
These moves have been broadly criticized. Jeremy Mark, former senior communications adviser and speechwriter to the International Monetary Fund, called such sanctions shortsighted.
“The measures targeting SMIC could significantly affect the global semiconductor ecosystem that has grown up over the past thirty years,” Mark said in an article published late September last year on the Atlantic Council website. “Supply chain disruptions would consume years of work and vast sums of money.”
Statistics showed that China accounted for over 50 percent of global semiconductor consumption in 2019.
Experts also warned that U.S. tech restrictions and trade barrier on China could backfire, as the United States will risk losing the Chinese market, which no major companies in the world can afford.
For example, smartphone manufacturer Apple Inc. announced Thursday that its Greater China revenues surged 57 percent to 21.3 billion U.S. dollars for the three months ending in December, more than 20 percent of its total revenues.
U.S. semiconductor producer Qualcomm enjoyed an even larger share of revenues from the Chinese market, making up nearly 67 percent of its total revenues in 2020.
A report by the Boston Consulting Group published in March 2020 showed that the United States could lose 18 percentage points of share and 37 percent of its global revenues if it “completely bans semiconductor companies from selling to Chinese customers, effectively causing a technology decoupling from China.”
Even if the U.S. government maintains the current restrictions, it could still cost the U.S. industry 8 percentage points of global share and 16 percent of revenues, the report added.