The Prolonged Effects of Semiconductor Shortages in Mexico

The semiconductor shortage is still taking a toll on the global automotive industry. The pandemic surged demand for electric devices, such as laptops and other gadgets that use these chips, causing a global supply shortage. In Mexico, over the course of 2021 the shortage caused automakers to stop manufacturing 135,845 vehicles, reports El Financiero. 

The automotive industry could recover its production numbers by the second half of 2021, told Alberto Bustamante, Director of the National Auto Parts Industry (INA), to El Financiero. This recovery would not necessarily mean an increase in semiconductor production but a return to normal. “As COVID-19 cases decrease and the return of economic and academic activities begins, the demand for electronics will be reduced. This will allow for a larger supply of semiconductors for the automotive sector,” said Bustamante. 

The effects of this chip shortage can still be felt globally, Japanese OEM Mazda, announced that it expected the shortage to affect 100,000 of the company’s vehicles during 2021, reports Reuters. According to AlixPartners, the global semiconductor chip shortage will cost automakers US$110 billion in lost revenues throughout 2021, which is much larger than a previous estimate of US$61 billion, reports Reuters.

Any Positive News for Mexico?

Mexico’s automotive industry continues to reactivate and has already reached 85 percent of its capacity, according to the Mexican Association of the Automotive Industry (AMIA), reports El Heraldo de México. Before the health crisis, the country’s automotive sector operated at levels close to 90 percent. 

Mexico’s automotive industry is also delivering more vehicles than in 2020 when the health crisis erupted. In April 2021, 269,180 vehicles were assembled in Mexico, a figure much higher than the 3,722 that were assembled in the same month of 2020, reported the National Institute of Statistics and Geography (INEGI). Exports have also grown considerably. Mexico’s automotive industry exported 234,584 vehicles in April 2021 but only 31,183 that same month in 2020, reports INEGI.

Despite the recovery in sales, the country is not faring like it used to in the case of light vehicles sales to the US. According to El Heraldo de México, between January and April 2021, only 10.5 percent of the vehicles sold in the US came from Mexico, which is considerably less than before the pandemic. “Our participation during the last years oscillated between 14 and 16 percent. It is a relatively significant difference. Again, this is an effect of the difficult start we had in production derived from the shortage of semiconductors,” commented Fausto Cuevas, Director General of AMIA to El Heraldo de México.