What is the Ford Chip Shortage?

This could be the defining consumer issue of 2021, affecting everything from cars to furniture, but what is it?

We dug in to see what it means, how we got here, and what the future holds.

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You've probably heard that there is a global shortage of semiconductors or what we're referring to as the Ford Chip Shortage.

When local manufacturing plants, restaurants, and retail stores started shutting down because of the pandemic last April, everyone thought that consumer spending would drop off a cliff as people lost their jobs or stopped buying nonessential goods.

All major auto manufacturers, including Ford, cut back on production and ordered fewer computer chips that make cars run today.

Simultaneously, as millions of us started to work from home and children started to go to school from home, money that previously went for movie tickets and vacations was now going to new TVs, computers, video game systems, and computer video cameras.

Electronic and computer manufacturers bought up all of the extra chips to meet their increased demand. By the time Ford and the other auto manufacturers realized that you and other customers still wanted a new car or truck, it was too late. That's what we're dealing with right now as millions of cars are sitting in factory lots, nearly finished except for the computer chips they need.

The auto manufacturers were just following how auto manufacturing works. Ford and most global automakers operate using a "just-in-time" manufacturing process today. Instead of having warehouses full of parts ready to go into finished new cars, they rely on suppliers to deliver the parts to plants right before installing them on new vehicles.

Some parts arrive at the plants hours before they're fitted to a car. If the supply chain is interrupted at any point, which is what we see now, the micro-chips and final assembly grind to a halt. Chips are also very complicated to make, and they are manufactured in foundries, which are all currently running at full capacity, and it takes two years to build a new one. So, they can't build more.

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The use of semiconductors in cars and trucks has also increased as they are now a key component in new Ford cars and trucks. Today, there can be as many as 100 in one vehicle. They support everything from power steering and braking systems in new cars, climate control, driver assist, and all of the new autonomous driving capabilities, sensors used for parking, the digital vehicle monitor in the Ford Pass APP – the list goes on.

The tight new vehicle inventory has been an issue for Ford and the entire auto industry since the summer, and it's projected to worsen with the chip shortage. Globally already this year, 1.4 million fewer vehicles have been produced because of the chip shortage. That number could more than double to 2.5 MM if the situation doesn't get better. In January, February, and March of this year, about 100,000 fewer trucks were manufactured in the US. We can already see this on dealership lots. In January of last year, before the pandemic, there were enough vehicles produced to supply 77 days of consumer demand. By February of this year, 2021, it's down almost 30% to 55 days.

F150 productim line
Ford F350

The good news is that we should see some recovery from the chip shortage by September or October of this year. However, there are going to be a lot of backorders. The best thing you can do is contact Bill Brown Ford now or call 734-237-3832 and pre-order your new Ford car or truck if your lease is due later this year. After Ford fills the backorders, they have said that they are going to prioritize vehicle orders.

Contact us now at 734-237-3832 to place your pre-order and ensure you get your new Ford when your lease is due. If your vehicle is due now, you should still contact us, and we can place a custom order for you to ensure you get your car your way. All of the lost production units from this year, 2021, will be made up by 2022.

Stay in touch on the latest happenings with the global chip shortage.

Bill Brown Ford | 32222 Plymouth Road, Livonia MI 48150 | (734) 399-4244

Bill Brown Ford of Livonia serving Canton, Farmington, Redford, Westland, Novi, South Lyon, Dearborn, Plymouth, Southfield, Northville, Ann Arbor, and Metro Detroit.