Combined with the economic pressures of the coronavirus pandemic, the limitations facing the semiconductor industry could lead to major set backs for the connected car industry

One of the most exciting prospects in the telecoms world today is the concept of connected vehicles. Often touted as something that can only be fully realised using 5G, the idea of vehicles communicating with one another via a mobile network has been a topic of exploration for a long time, with the ultimate goal of streets filled with self-driving cars. 

But while the discussion has traditionally centred primarily around the speeds, reliability, and low latency of 5G, combined with edge computing, the semiconductors relied upon by car manufacturers are often overlooked. 

Now, however, with a global semiconductor shortage slowing production for an enormous variety of industries around the world, the importance of these chips in defining the future of connected vehicles is becoming more and more apparent.

During the early onset of the coronavirus, many chip manufacturers temporarily ceased production, only restarting the process later in the year. At the same time, global demand for these products increased dramatically, and supply issues between the US and China further muddied the waters of the supply chain. Delays began to grow more noticeable, from the resulting limited availability of Sony’s PS5 console to Apple’s delay in launching the iPhone 12. Perhaps most notable has come earlier this month, with Samsung – the world’s second largest producer of semiconductors – suggesting it may have to postpone its latest flagship smartphone as a result of supply chain woes.

One of the worst struck industries has been the automotive sector, with many major players dramatically cutting their semiconductor orders at the start of the year in anticipation of reduced vehicle demand during the pandemic. While surely a sensible decision at the time, the current supply crisis means these automotive players now find themselves at the back of the queue when it comes to resupplying. Toyota and Volkswagen, for example, only spend around $4 billion each on semiconductors per year, which pales in comparison to the likes of Apple, who buy around $56 billion.

“This is the biggest threat to the development of truly connected vehicles that we will see in a generation. It comes at a time when vehicle manufactures are wrestling with the global impact of the of COVID pandemic and the acceleration towards the mass adoption of EVs [electric vehicles],” explained Tom Blackie, founder and CEO of VNC Automotive. “Our customers are experiencing serious supply issues, with some making big long-term commitments in order to get any kind of guaranteed supply, and the implications are much higher costs. This situation is out of car manufacturers’ control and will force them to restrict production or compromise the technology they are able to implement in cars.”

When it comes to connected vehicle tech development itself, the lack of availability of state-of-the-art chips could mean that vehicles are being built with older technology that cannot take advantage of the latest advances in connectivity, soon leading them to become incompatible. 

“This will ultimately impact consumers, who will be left with stagnated systems or, in extreme cases, retrograde technology as manufacturers and Tier 1 suppliers are forced to hobble systems to work with less advanced semiconductor designs,” said Blackie. “As a leader in the field of systems and software development, we’re concerned that it will lead to a generation of cars that will became quickly incompatible with future mobile phones and connectivity technology. In this way it may have knock on effects for the development of EVs and even autonomous technologies.”

With the semiconductor industry slow to increase production to meet new demand, this supply chain crisis shows no signs of stopping soon. While the impact will surely be felt in many industries around the world, it may be the development of connected vehicles that sees one of the most pronounced slumps as a result.


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