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GLOBAL auto production has been hit for the past two years due to a shortage of semiconductors but as soon as new or expanded chip factories start to operate, the global recession and inflation fears Rampant is reducing demand.

The net effect is evolving into a complete shift from a semiconductor shortage to an overabundance.

The increase in production, aided by government incentives in several countries including the United States, is met by consumers now more cautious in purchasing vehicles and other equipment that require quality. Semiconductor.

According to the manufacturer of connecting hardware and software in vehicles, VNC Automotive, there will soon be a sudden oversupply of chips due to many new factories and reduced demand.

VNC Automotive is holding this information as they develop and deliver software across the automotive ecosystem to corporations such as Volkswagen Group, Toyota, Honda and Stellantis as well as equipment and component suppliers Bosch, Pioneer, Clarion, Sony, LG and Huawei.

Tom Blackie, CEO of VNC Automotive said: “It is ironic that the very situation that caused shortages for much of the auto industry that should have spurred the recovery has now been reversed due to recession prospect.

“In fact, the pace at which it turned to oversupply was such that we were regularly approached by chip suppliers asking if we wanted to increase orders.”

VNC Automotive pointed out that the looming global economic downturn along with the cost-of-living crisis are starting to affect consumers, prompting consumers to quickly curb their spending.

Instead of upgrading to the latest smartphone or ordering a new laptop, savvy buyers are choosing to keep their existing devices for longer.

New data shows an increased number of cancellations from white goods manufacturers, now more tech-heavy than ever, while manufacturers of more complex devices like tablets and smartphones. I’m taking a step back.

As more chips became available, the auto industry was quick to take advantage, especially with the growing demand for high-power chips to control more complex in-vehicle systems.

“Vehicles are becoming more complex, connected to a broader digital ecosystem, and increasingly defined by their software, and this thirst for computing power has led to a Convergence has seen traditional IT companies such as Intel and Nvidia hold an important position in the automotive world,” VNC Automotive said in a statement.

The company said data shows the automotive industry accounts for less than 9% of semiconductor volume in 2020, worth an estimated US$38.7 billion (AU$56.9 billion).

However, that number is forecast to grow to more than US$116 billion (US$170.66 billion) by 2030 as electric vehicle production increases and sophisticated driver-assistance features as well as autonomous vehicles increase. Autonomous driving requires an increasingly high level of processing to match advanced artificial intelligence algorithms.

In dollar terms, that means the average semiconductor content per car will increase from about US$712 (US$1047) in 2022 to US$931 (US$1369). in 2025.

Unfortunately, a chip glut doesn’t necessarily mean that buyers will see a big drop in new car prices, but on the plus side, the supply of new cars will be less of an issue.

Electronics control every aspect of a new car from the powertrain (engine and transmission), safety equipment and infotainment to simpler systems like power windows, lights , lock, starter, alternator, power steering, suspension and brakes.

Before the pandemic, small components were sourced from only a handful of factories globally including Taiwan and South Korea, where COVID-19 has affected production and caused supply chain problems for raw materials. raw materials and finished products.

This, the rush to work from home, and prolonged closures have had a knock-on effect as demand for vehicles evaporated while other tech sectors boomed as people and their employers alike. they clean up the home office and upgrade the entertainment system when they get stuck inside.

As vehicle demand recovers dramatically as people vacation closer to home due to international travel restrictions and do not want to get infected on public transport, automakers are forced to cut production. caused by a shortage of semiconductors, which then affected other industries and also forced the price increase of new and especially used cars.

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