What is Causing the Semiconductor Chip Shortage?
Author: Alexi Rafferty
July 16, 2021
If you’ve been in the market to buy a new truck, you’ve probably heard people talking about why it’s such a wrong time to buy a truck. This might seem ridiculous, as it’s possible that you see many trucks sitting around in parking lots of dealerships. So, what’s the deal?
Table of Contents
Even though we’ve seen many standards return to life since the pandemic, that doesn’t mean COVID-19 hasn’t played a part in this national vehicle shortage we’re seeing. First of all, a lot of facilities were shut down early on in the pandemic as an attempt to minimize the spread of the virus. However, the shutdown didn’t slow down the consumer demand for electronic products.
Since the beginning of the pandemic, many employees had to adapt to working remotely, which increased the demand for technology for their at-home setups like laptops and monitors. And for the most part, people weren’t buying new pickups during this time. This forced semiconductor manufacturers to switch their focus from vehicles to computers to keep up with the current market’s needs. You might be thinking, what does this have to do with anything...I’m not trying to buy an IPad?
Well, most newer trucks have semiconductors in them. This allows them to do all that fancy stuff like power your onboard computer or LED dashboard displays. The shift of attention for semiconductors for tech products from vehicles didn’t erase the need for them. The number of people in the market for a vehicle is higher than expected, creating a demand chip manufacturers haven’t been able to keep up with due to the shortage.
Auto manufacturers tried to regain full-scale production status. Still, they hit a halt when they realized semiconductors simply aren’t available to install, leaving many new trucks sitting in parking lots without the highly sought-after tech advancements owners look for in new pickups.
Semiconductor chip makers are plain stressed. The insanely high demand was met with roadblocks of natural disasters such as fires or cold weather that had forced the closures of plants, putting an already struggling supply even further behind.
So, you might be wondering, what does this all mean? Is it impossible to buy a new vehicle? Well, the answer is no. But, their supply is dwindling, and the prices are skyrocketing. And everyone is trying to buy right now. Many big automotive companies were accepting the reality of the chip shortage and slowed down or halted the production of 2022 lineups. It’s becoming a sprint to buy up as many used trucks as possible, as fewer trade-ins will happen when sales of new vehicles plummet. In the end, it won’t be easy to get new or used vehicles.
People hoped to get around the high after the prices of a new pickup by going down the used route, but they might find themselves disappointed now too. Supply shortages have increased used truck prices by about 25% year over year. Many popular used models like the GMC Sierra 1500 and Chevy Silverado 1500 have seen nearly an $8K-$9K increase in price change from April 2020.
The reality is, if you’re going to buy a truck at all right now, you’ll probably pay more than usual. On the other hand, if you’re going to sell a used truck, now’s the time to do it. No matter what you’ve got, full-size, mid-sized, doesn’t matter...Your truck has some extra value to it these days. It’s a sell high, buy high kind of world right now.
So, it’s not your lucky day if you were excited about releasing new, refreshed 2022 truck models. A lot of big companies, such as GMC and Chevy, have had to delayed 2022 Sierras and Silverados because of the chip shortage because they want to minimize the waste of time and money that comes with manufacturing a truck that isn’t going to be ready to sell until they get their hands on some semiconductors.
The question on everyone’s mind is, when the heck will this shortage be over? And at this point, it’s pretty hard to tell when everything will get back to normal. Experts anticipated it to be a quick summer issue earlier in the year, meaning things will mellow out near the end of August. However, more recent reports believe it to be upward of a year until the shortage is over.
It’s hard to tell what the damage will be after another whole year of dealing with this, as it is estimated that the shortage so far has cost General Motors over $2 billion by stopping average production. We wonder how much more some companies can take. However, not all companies are hurting because when they caught wind of the shortage, they stockpiled semiconductors, like when everyone went nuts and bought all the toilet paper.
So, this isn’t the most important news to hear if you’ve been actively trying to buy just about any vehicle, especially a truck, right now. It’s not ideal, so if you’re able to wait another year or so, you will probably have more new truck options, along with better prices if you’re looking for used.
Buying a truck is exciting, and it’s even more fun once you get to start the build process so you can achieve the setup you’ve been dreaming about. Have you been in the market for a new truck or sold one recently? We’re curious to know what that process has looked like during these crazy times. Let us know in the comments below what your buying or selling experience has been since the chip shortage started.