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New outlook says semiconductor chip shortage will cost auto industry $210B

New outlook says semiconductor chip shortage will cost auto industry $210B
The chip shortage has so far idled a number of plants in North America. Earlier this month, General Motors halted production at multiple plants due to the shortage.  File Photo by tartaruga1988/Shutterstock

Sept. 23 (UPI) -- The global semiconductor chip shortage will cost the automotive industry $210 billion in revenue this year, nearly twice the cost projected just a few months ago, consulting firm AlixPartners said Thursday.

The firm said its updated estimate shows that the auto industry will lose far more than the $110 billion forecast in May.

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The experts at AlixPartners said 7.7 million units will be lost in 2021 because of the shortage, up from 3.9 million in the previous estimate.

"Of course, everyone had hoped that the chip crisis would have abated more by now, but unfortunate events such as the COVID-19 lockdowns in Malaysia and continued problems elsewhere have exacerbated things," Mark Wakefield, AlixPartners global co-leader of the automotive and industrial practice, said in a statement.

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Wakefield added that the shortage is helping to create a perfect storm of challenges for auto production, which also includes shortages of resin, steel and labor.

"There's no room for error for automakers and suppliers right now; they need to calculate every alternative and make sure they're undertaking only the best options," he added.

Dan Hearsch, managing director in AlixPartners' automotive and industrial practice, said part of the problem is that the auto supply chain is global.

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"Virtually any shortage or production interruption in any part of the world affects companies around the globe, and the impacts are now amplified due to all the other shortages," Hearsch said in a statement.

"That's why it's critical that companies be armed with good information and analysis to begin with, and that they follow through with flawless, determined execution."

The chip shortage has so far idled a number of plants in North America. Earlier this month, General Motors halted production at multiple plants due to the shortage.

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