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Semiconductor Chip Shortage To Cost Auto Industry $210 Bln In FY21

The global semiconductor chip shortage will put back the auto industry by nearly $210 billion in revenues in fiscal year 2021, a forecast released by consulting firm AlixPartners said on Thursday.

The latest projection is double the New York-based firm's earlier prediction of $110 billion loss of revenues released in May. In January when the chip problem had first surfaced, AlixPartners had projected an initial forecast of $60.6 billion loss of revenues for the year ahead.

The consulting firm is now predicting a loss of 7.7 million units, up from the 3.9 million projected in the May forecast. "The biggest hit to production occurred in the second quarter, AlixPartners added.

Commenting on the projections, Mark Wakefield, global co-leader, automotive and industrial practice at AlixPartners, said, "Of course, everyone had hoped that the chip crisis would have abated more by now, but unfortunate events such as the COVID-19 lockdowns in Malaysia and continued problems elsewhere have exacerbated things."

The second quarter has been the worst one in terms of chip shortages. The firm predicts the semiconductor chip problem to extend to the second half of 2021 or even longer, until vehicle inventory levels pick up substantially, without there being issues with labor, transportation and other materials.

Auto giants all over the world like Ford Motors Co. (F) and General Motors Co. (GM) have already predicted huge losses due to the chip shortage issue. However, there is some hope to cheer because higher consumer demand and profits from higher vehicle prices will partially offset these losses.

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