Said Thorsten Muschal, president of CLEPA, the European Association of Automotive Suppliers, commenting on the shortages of semiconductors impacting the automotive industry, he continued,
While the crisis is not yet over, we believe we've seen the worst and the situation is not likely to further deteriorate. But it cannot be excluded that the effects may be felt further, well into 2022. These circumstances also have an indirect impact on suppliers that are not using semiconductors for their own product portfolio, so it affects all of the automotive supply chain
In view of the strategic importance of semiconductors for the automotive industry, CLEPA has put together a report with policy recommendations based on input from its member companies. This document provides guidance on how to strengthen supply chain resilience in the EU and delivers principles for a strong European industry in microelectronics.
A timely response to the semiconductor crisis is essential to strengthen EU competitiveness and protect the jobs of thousands of citizens in the EU. Automotive suppliers alone employ 1,7 million people in companies developing sustainable, smart and safe mobility technology. Automotive is responsible for 37% of the demand for semiconductors in Europe, compared to a global demand share of 10%. A successful EU strategy for microelectronics can only be achieved through building on the central role of automotive suppliers, finds the CLEPA report.
The European Commission has identified connected and autonomous vehicles as a strategic cluster that offers the EU significant potential. Advanced driver-assistance systems are taking an essential role in moving towards safer and climate-neutral mobility. As well as boosting societal benefits, this technology has increased the value share of electronic and semiconductor systems to 35% of a car's cost, with this being likely to continue growing to 50% with the further development of connected and autonomous vehicles.
The CLEPA report draws particular attention to the role of small and medium-sized enterprises (SMEs). The smartisation of mobility poses big challenges for SMEs, which need to rapidly transform their production lines and rethink their access to materials. Without conditions and investment supporting R&I departments and industrial deployment, some of the smaller companies might not be able to meet demand, and this may seriously affect employment.
"Small and mid-sized companies are in a particularly challenging position because they are often more subject to the circumstances than master of the solutions and depend very much on decisions that others in the supply chain take, both at the end of the materials supplier as well as at the end of the customer", says Marco Stella, vice-president and SME representative of CLEPA, and CEO of the Italian SME Duerri Tubi Style. "Especially for those that are still short on liquidity, still recovering from the pandemic, the need to evaluate employment levels can arise. The challenge here is to maintain the ability to immediately respond again when the material supply and customer market picks up."
The chip shortages have already delayed the production of 500,000 vehicles all over the world. In the EU some vehicle manufacturers have scaled-down production activities. It is likely that the semiconductor chips shortage will limit manufacturers' ability to restore global vehicle inventories until late 2021 or early 2022.
It is estimated that in Europe, stock levels are healthy at 60 days between production and the moment vehicles hit the road, suggesting that production disruptions on average have had limited consequences for vehicle manufacturers to meet demand. The question remains on whether the companies' supply will be in the same situation in the upcoming year. And it is here where jobs are very much at risk.
Advanced processor chips installed in electronic control units are essential for the performance of vehicles today. A modern car may contain around 100 electronic control units, and between 20 to 40 microcontrollers in charge of functions such as engine and power steering, door lock, or keyless entry. The electrification of the powertrain and the development of connected and autonomous vehicles will only further enforce the importance of semiconductor chips.
Europe's automotive industry sources 60-70% of its chips in production through contract manufacturing facilities in Taiwan and China. Europe has relatively strong automotive chip-design capabilities, but the EU's fabless industry specialised in chip design shrunk by 50% over the last 10 years, highlighting the need to reassess supply chain dependencies in the critical area of semiconductor technology.
Read the report