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Why the Automotive Chip Crisis Isn't Over (Yet)

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Abstract

New car buyers face limited inventory, long order wait times, and rising prices primarily because of lingering automotive supply chain disruptions. It is difficult for automakers to produce enough vehicles to meet demand, and the main culprit is reported to be the lack of semiconductors—or chips. Professional forecasters have ratcheted down their sales and production predictions as the months go by, and the supply-constrained conditions have not returned to pre-pandemic levels. In this article, I investigate why the chip crisis is still with us and why some forecasts suggest that it will continue at least into 2024. Specifically, in this Chicago Fed Letter, I look at the origins of the chip crisis, factors driving increased chip content in vehicles, the market dynamics for different types of chips, semiconductor industry investments, the role of public policy and automotive firm strategies in addressing the crisis, and the factors that could improve or worsen future automotive semiconductor supply.

Suggested Citation

  • Kristin Dziczek, 2022. "Why the Automotive Chip Crisis Isn't Over (Yet)," Chicago Fed Letter, Federal Reserve Bank of Chicago, vol. 0, October.
  • Handle: RePEc:fip:fedhle:95082
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    File URL: https://www.chicagofed.org/-/media/publications/chicago-fed-letter/2022/cfl473-pdf.pdf?sc_lang=en
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    More about this item

    Keywords

    Industrial organization;

    JEL classification:

    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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