The global chip shortage has officially hit our local auto industry
Major car manufacturers including GB Auto have been forced to slash production due to the global chip shortage, Khaled Saad, who heads the Egyptian Association of Automobile Manufacturers, reportedly told the local press. Car makers weren’t able to get their hands on enough electronic control units (ECUs) in recent months, Saad said, adding that those are key components used to control electrical systems in vehicles. More crucially, these are not components domestic car makers can produce, he notes. This is already putting pressure on car prices domestically and is expected to raise prices further, he added.
A blow to the natgas transition plan? Car assemblers taking part in the government’s plan to swap out outdated cars for newly-built natural gas powered ones might be forced to delay deliveries if they don’t secure enough ECUs, say industry insiders speaking to the local press, including Saad. The pace of deliveries in the state-backed program, which aims to take as many as 1.8 mn old cars off the road over a decade, has already been sluggish since it began earlier this year.
How long is the shortage expected to last? At least a little while. Some global facilities might be able to start ramping up production and fulfilling orders during 1H2021, Saad said. Industry analyst Hussein Moustafa, meanwhile, expects the shortage to remain with us until at least the beginning of 2022.
On the global front, it could take even longer, as Intel CEO Pat Gelsinger suggested in an interview this week that, globally, the crisis could last a few more years. Demand had begun to search earlier in the year after lockdowns in 2020 pushed up sales of tech devices. Demand is expected to kick into overdrive this year with the advent of new technologies, such as 5G. Need a refresher on the global chip shortage? Check out our in-depth explainer here.
Can Egypt make those ECUs? Maybe. Setting up local facilities to manufacture those high-tech components is difficult at present, but it could be possible down the road if local car agents collaborate with their brand owners, noted Khaled Khalil, head of the Automotive Feeding Industries division at the Federation of Egyptian Industries.
Why is it so hard to establish a domestic chip industry? For one, it takes years to build semiconductor fabrication facilities and bns of USD, according to this interesting and well presented primer from Bloomberg yesterday. It also takes a deeper dive at the supply chain complexities that explain why the world can’t produce more chips and semiconductors despite really wanting to.
THE MOTHER OF ALL SUPPLY CHAIN DISRUPTIONS COMING? Copper has been growing increasingly scarce recently, with existing stocks enough to cover only three weeks-worth of demand, Bank of America commodity strategist Michael Widmer wrote in a recent note picked up by CNBC. This could lead copper prices to reach upward of USD 13k per tonne in the coming years after having already surged to a decade-high of over USD 10k a tonne this year on the back of the recovery-fueled global commodities rally.