Like most industries, the global automotive industry has been affected adversely by COVID-19, forcing many manufacturers to delay the production of new cars.

But it's not for the reason you may think.

Sales of new cars have increased since 2020, along with smartphones, laptops and tablets - but all of these industries are now facing delays in producing goods for customers.

What links all of these items is their need for semiconductors.

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In the automotive industry, semiconductors power everything from heating and windows to airbags and brakes, representing a $33 billion niche market according to analysis.

But a 16 percent decline in passenger car sales in 2020 due to COVID-19, meant a reduction in semiconductor orders from the automotive industry.

Meanwhile, the consumer products industry, which makes up a much larger portion of global semiconductor sales, saw rapid growth as more people needed electronics to work from home during global lockdowns.

Then, with the rebound of new car sales following the first lockdown, automotive manufacturers found themselves short on supply with chip production dedicated to consumer electronics.

“It takes a while. A tip is designed for a specific purpose,” Wolfgang Weber the Managing Director of Z.V.E.I, Germany's association for the electronics industry says. He believes new capacity needs to be found to satisfy this renewed demand in chips for the automotive industry.

 "You can't produce one chip for a tablet and then sell it to a car maker. So it takes a while to re-adjust the production process.”

Car manufacturing demands too conservative

At the same time, automotive expert Ferdinand Dudenhöffer says the car manufacturers' forecasts are sometimes very pessimistic. "On the one hand, the car makers underestimate the demand and they are very conservative in giving the demand they need to the next step in the supply chain," he tells CGTN. 

"And this time lagging process means that you could come into a situation when demand is much higher than capacity."

This has led several automotive brands to scale back output to compensate for the lack of parts needed.

Germany's Volkswagen Group told CGTN, "The Volkswagen Group has been working continuously to minimize the effects of the global semiconductor bottleneck on production and to improve the supply situation in the short and medium-term. At the same time, we are pushing long-term optimization. We expect on the current situation that the entire first half of the supply of chips will continue to be tense."

Building new capacity

"Chip manufacturers and the automotive industry need to start finding a solution together," says Weber.

And that is exactly what is happening as companies look at ways to diversify chip manufacturing in order to avoid a repeat of supply issues in the future.

According to Weber, this is becoming increasingly important as tension increases between the U.S. and China, the centers of global chip production

"So entrepreneurial companies have to re-adjust to that situation," he says. "Therefore, yes, it does make sense right now that companies invest in more capacity in more regions. And it also makes sense for Europe to find its own way, so Europe remains technologically sovereign."

The European Union and many of its member states are designing programs to help build chip manufacturing capacities across the continent, but this will take time, leaving some predicting the automotive production could be disrupted until 2023.