The Auto Industry Isn't The Only One Having Chip Issues

The chip shortage that has been plaguing the auto industry for over a year, causing massive production shutdowns, layoffs, and vehicle delays, is also putting a major dent in how tech companies are able to operate.

The chip supply chain constraints that have dented automakers’ profits have also taken a hit to big name players such as Apple and Nokia.

Apple chief financial officer Luca Maestri said during the company’s earnings report on Friday that Apple could see its sales hurt by as much as $4 billion to $8 billion due to COVID-19 related supply issues, which include chip shortages, CNBC reported.

Chips are an essential component in tech devices, and like the auto industry, the supply of this important component has been stretched.

Apple CEO Tim Cook warned that the supply chain challenges were not something that the tech company was “immune” to, adding that it was seeing “very significant supply constraints” during the last quarter, according to the news outlet.

Tech companies are also seeing their sales stunted due to the lack of chips, which Nokia CEO Pekka Lundmark told CNBC, “The situation has stabilized but continues to be fairly tight.”

He added, “When we talk about semiconductors, we are seeing improvements here and there. It’s quite supplier-specific at the moment but when we look at the full year and the second half of the year, we continue to be hopeful that things will start looking better towards the end of the year.”

Intel CEO Pat Gelsinger told CNBC that he thinks the chip shortages will continue for years.

“...We believe the overall semiconductor shortage will now drift into 2024, from our earlier estimates in 2023, just because the shortages have now hit equipment and some of those factory ramps will be more challenged,” he said.

But automakers are taking the brunt, with some eliminating some key features from their vehicle due to the lack of supply of semiconductor chips.

Volvo CEO Jim Rowan told CNBC’s “Squawk Box Europe” last week that the company doesn’t have enough chips for one specific chipset. He continued by saying that Q2 will be affected by the chip disruption but said that for the second part of 2022, Volvo has “secured supply” of the chips.

Chip shortages were further exasperated as China issued lockdowns to maintain its zero-COVID strategy. Chinese chipmakers were prevented from operating, creating a shortage that was further tightened for many companies.

Berenberg economists Kallum Pickering and Salomon Fiedler said in a research note last month that the chips shortage was improving for the auto industry, but a rebound in real terms was likely to be less than the sales value suggested by raising prices of vehicles, CNBC reported.

“The process of catching up with the backlog of orders will take time. Companies will need to work overtime for a while,” they wrote.