Falling demand for consumer electronics could free more microchips for car production, according to a British tech company.
New-car buyers could get an unexpected bonus from slowing world economies as demand for consumer electronics falls and more microchips become available to the automotive industry.
The supply of semiconductors could flip from a drought to a flood if predictions of widespread recessions are correct, according to a British company supplying connectivity software and hardware to many of the world’s biggest automotive companies including Toyota and Volkswagen.
There is no sign yet of any improvement in Australia because of the long lead times from production lines to showroom floors, but VNC Automotive in the UK is predicting a significant change in 2023 if the current global economic slowdown continues.
“In a time of economic gloom, it’s good to find a cloud with a silver lining,” the CEO of VNC Automotive, Tom Blackie, said in a media statement.
“It may still take some time for this freer-flowing supply to trickle down to car-buying consumers, as manufacturers work to clear the backlog that’s accumulated over the last couple of years.”
The key to the microchip supply is demand for consumer electronics, from televisions and other ‘smart’ home appliances to computers, tablets and mobile phones.
Demand for these microchip-rich products rocketed during COVID-19 but VNC forecasts falling demand with the current economic slowdown.
“It’s ironic that the very situation that triggered the shortage for much of the automotive industry should be driving the recovery, now that it has become reversed due to the prospect of recession,” said Mr Blackie.
He said VNC – whose technology is currently fitted to more than 35 million vehicles worldwide – is already seeing better availability from microchip suppliers.
“Such has been the speed of the shift to oversupply that we are regularly approached by chip suppliers asking if we’d like to increase our orders,” he said.
Mr Blackie is also forecasting a change in the relationship between carmakers and chip suppliers, as well as a boom in demand for microchips as production of electric vehicles increases and cars are fitted with more driver-assistances systems.
The automotive industry accounted for less than 9 per cent of semiconductor volumes in 2020, according to research company Gartner, worth an estimated $US38.7 billion. However, that is forecast to rise to just over $US116 billion by 2030.
Modern cars are equipped with between 300 and 3000 semiconductors due to the increased technology and safety systems fitted as standard.
“In the past, the auto industry has had a rather adversarial relationship with (semiconductor) suppliers, always gouging on price and making little in the way of future commitments,” said Mr Blackie.
“I think it’s been realised that automakers are small players in comparison to some of the other industries chip fabs are used to working with, and that a new, healthier relationship is called for.”
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