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How is the chip shortage affecting the auto industry?

computer chips

In the recent months, you may have noticed that supply chain issues have caused delays in industries like coffee, alcoholic beverages, and cleaning products. But these scarcities go deeper than our everyday lives, affecting a wide variety of industries — including car manufacturers. With a worldwide shortage of semiconductors, many in the automotive industry are struggling to produce the number of vehicles needed to meet demand. To learn how this may affect you and what to do about it, read on.


What is the global chip shortage?

At various times during the pandemic in 2020, many factories had to limit operations or close temporarily, including some that produced semiconductors. This caused a backlog in production. At the same time, people all over the world were staying home using technology more frequently, which increased the demand for electronics that use semiconductors. With fewer semiconductors manufactured and more demand for their use in electronics such as smartphones, laptops, tablets and smart home devices, auto manufacturers faced severe shortages of semiconductors, which are used to create microchips used in today’s vehicles.


What is the purpose of microchips in vehicles?

Since the technology in cars has become more advanced over the years, the internal systems are complex and intricate, using semiconductors with microchip processers to power their electronic components. Luxury vehicles and cars with high-tech equipment, such as advanced safety systems and driver assistance features, may have 100 or more processors onboard*.


How will this affect the auto industry moving forward?

Since many automakers are unable to produce enough cars to meet demand, you may find a highly competitive market for new cars right now, with dealerships finding it hard to keep inventory available. We may not recover from the chip shortage and have enough cars to meet demand for several more years.


What can you do during this chip crisis?

To avoid high prices and fewer options to choose from, consider keeping your current vehicle instead of buying a new one, or repairing your current car if there are mechanical issues. If you were thinking of selling an extra car that you don’t use often, now is also the perfect time to do that, since the market is pushing more individuals to purchase used cars.


This document is advisory in nature and is offered as a resource to be used together with your professional insurance advisors in maintaining a loss prevention program. It is an overview only, and is not intended as a substitute for consultation with your insurance broker, or for legal, engineering or other professional advice.

Chubb is the marketing name used to refer to subsidiaries of Chubb Limited providing insurance and related services. For a list of these subsidiaries, please visit our website at Insurance provided by ACE American Insurance Company and its U.S. based Chubb underwriting company affiliates. All products may not be available in all states. This communication contains product summaries only. Coverage is subject to the language of the policies as actually issued. Surplus lines insurance sold only through licensed surplus lines producers. Chubb, 202 Hall's Mill Road, Whitehouse Station, NJ 08889-1600.

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