Argus Media reports electronic semiconductor shortages and rising demand for them in other industries will slow production in the car industry in 2021.

"The massively restricted supply situation for semiconductors is causing considerable disruptions in global vehicle production across all manufacturers," Volkswagen told Argus Media. "Due to the Covid-19 pandemic and the resulting decline in sales in the automotive industry, leading semiconductor manufacturers switched their production to other customer industries, such as consumer electronics. In the meantime, however, the car markets have recovered significantly, especially in China. This exacerbates the current situation and the industry — and also the Volkswagen Group — lacks appropriate electronic components."

While car production slowed in the first half of 2020 due to the pandemic, semiconductor makers did not foresee the automakers recovery in the latter part of the year. Volkswagen, Mahindra, Mahindra and Chinese auto manufacturers have indicated vehicle production will be reduced due to this shortage of semiconductors needed for electrical systems.

Volkswagen told Argus “it will "adapt production" levels at various Chinese, North American and European locations in the first quarter of 2021 to the current supply situation, but did not estimate the actual volume impact.”  The MQB platform of Volkswagen passenger cars and commercial vehicles, Skoda, SEAT and, to a limited extent, Audi brands, will be impacted.

While demand for electric and traditional vehicles in China has increased through stimulus measures to promote sales, production will slow because of the shortages, the China Association of Automobile Manufacturers reported.

The pandemic also created increased demands for laptops and computer consoles which use semiconductors; and 5G base stations and devices further increased the demand for the electronic components.

Improved driving features also increased demand for semiconductors, as electronic content in vehicles has been rapidly increased needing more sensors, integrated circuits and power controllers.

“Industry association World Semiconductor Trade Statistics has revised up its forecast for global annual semiconductor sales, predicting an increase of 5.1pc in 2020, followed by a rise of 8.4pc in 2021, as the disruption it expected from the pandemic failed to materialise. It had previously forecast 3.3pc growth for 2020, climbing to 6.2pc in 2021. This year's growth will be led by a 12.2pc increase in sales of memory devices and 7.4pc growth in sensors, rising to 13.3pc and 7.8pc, respectively, in 2021,” Argus Media reported.

With the development of autonomous driving and electric vehicles, controller units need the performance of the semiconductors meaning they will also add to an increase in demand for semiconductors.