- Recession and cost-of-living crisis fuelling a fall in consumer spending

- Drop in demand for tech products would free up semiconductor allocation

According to in-car connectivity brand called VNC Automotive, the semiconductor shortage that has plagued the automotive industry for much of the last two years may soon be turned on its head. Disruptions in the supply chain caused by a series of disasters at critical production plants were compounded by a huge increase in demand for electronic devices as the pandemic took hold and work-from-home became the default for many.

However, with a global recession likely on the horizon and a cost-of-living crisis beginning to bite, consumers have been quick to rein in their spending. Instead of upgrading to the latest smartphone or ordering a new laptop on credit, buyers are choosing to hang on to their existing devices for longer. This fall in demand for consumer goods has freed up production capacity throughout the supply chain, from chips through to logistics, and the automotive industry has been quick to take advantage.

“It’s ironic that the very situation that triggered the shortage for much of the automotive industry should be driving the recovery, now that it has become reversed due to the prospect of recession,” says Tom Blackie, CEO, VNC Automotive. “In fact, such has been the speed of the shift to oversupply that we are regularly approached by chip suppliers asking if we’d like to increase our orders,” says Blackie.

Industry analysts have reported an increase in cancellations from producers of white goods, which are now more technology-heavy than ever before, as well manufacturers of more complex devices such as tablets and smartphones. Meanwhile, the automotive industry accounted for less than 9 per cent of semiconductor volumes in 2020, according to Gartner, worth an estimated $38.7 billion. However, that is forecasted to rise to just over $116bn by 2030 as EV production increases and sophisticated driver assistance features and autonomous vehicles demand ever increasing levels of processing power to accommodate the most advanced AI algorithms. Gartner’s figures suggest the average semiconductor content per car will rise from around $712 in 2022 to $931 in 2025.