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Everything you need to know about the chip shortage that's plaguing automakers

Jamie L. LaReau, Detroit Free Press on

Published in Business News

They are a little bigger than a coin the size of a quarter, but tiny semiconductor chips are bringing production of vehicles across the nation to a halt.

Car dealers have barren parking lots, consumers face limited options on new vehicle purchases and buyers must wait, and wait, for their new ride to be built. Tens of thousands of new vehicles sit in parking lots awaiting semiconductor chips before they can be shipped to dealers.

Here's what you need to know about semiconductor chips:

So what are these chips?

The chips are tiny transistors made from silicon, which is found in most of the minerals on the earth's surface. They allow computers, smart phones, appliances and other electrical devices to function. Vehicles use chips, too.

Silicon feeds a $500 billion chip industry, according to a report by the BBC. The chips underpin a global tech economy worth an estimated $3 trillion, the report said. The raw materials for the semiconductor business often come from Japan and Mexico, with the chips made in Taiwan, China and some in the U.S.

 

What is the chip shortage?

The chip shortage is a result of the COVID-19 pandemic, which increased demand for the personal electronics such as cell phones and laptops that the chips are used in to the point where production could not keep pace with demand.

Why is there a chip shortage?

So in March 2020, the global pandemic prompted automakers, suppliers and car dealerships to close down. The economy went into a recession.

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