Newsletter

Why the Automotive Chip Crisis Isn't Over (Yet)

Abstract: New car buyers face limited inventory, long order wait times, and rising prices primarily because of lingering automotive supply chain disruptions. It is difficult for automakers to produce enough vehicles to meet demand, and the main culprit is reported to be the lack of semiconductors—or chips. Professional forecasters have ratcheted down their sales and production predictions as the months go by, and the supply-constrained conditions have not returned to pre-pandemic levels. In this article, I investigate why the chip crisis is still with us and why some forecasts suggest that it will continue at least into 2024. Specifically, in this Chicago Fed Letter, I look at the origins of the chip crisis, factors driving increased chip content in vehicles, the market dynamics for different types of chips, semiconductor industry investments, the role of public policy and automotive firm strategies in addressing the crisis, and the factors that could improve or worsen future automotive semiconductor supply.

Keywords: Industrial organization;

JEL Classification: L52; L62; L63; O33; O38;

Bibliographic Information

Provider: Federal Reserve Bank of Chicago

Part of Series: Chicago Fed Letter

Publication Date: 2022-10

Volume: No 473