The global semiconductor market has long been dependent on Asia, but here are some of the major factors shaping chip manufacturing in Europe.
The Increasing Need for Electric Vehicle Components
Last year, it was revealed that electric car charging points may become a requirement for new build homes in the UK (Source: BBC News). This development shows just how mainstream electric cars are becoming, particularly as concerns about fossil fuels and CO2 emissions are brought to the forefront of societal issues.
As a consequence of this increased demand, more and more car manufacturers will require a supply of electric vehicle components to survive and thrive in the market.
The growth of the electric vehicle market
According to a report by Deloitte, the electric vehicle market will reach a tipping point in 2022, when the cost of owning an electric vehicle is on par with its internal combustion engine counterparts (Source: Deloitte). This prediction demonstrates the fast-accelerating growth of the EV market, and shows that OEMs will be expected to make available vehicles at an affordable price.
At the moment, the drop in price is being made possible by the availability of lithium batteries. Lithium-ion is the dominant technology for electric vehicle batteries and is currently available fairly cheaply, meaning that manufactures can produce electric vehicles at a lower cost.
Batteries are the most important electric car component, which is why the UK government has invested £23 million in UK companies to develop car batteries (Source: GOV UK). The government wants to establish the UK as a leader in technologies and emerging markets by investing in electric vehicle manufacturing.
What are the potential issues?
US-China trade wars
China is at the forefront of the EV manufacturing industry, and now has a larger market than the UK and the US combined (Source: McKinsey). Now that the US-China trade impasse is stronger than ever, the US and other countries across the globe may find it harder to import Lithium (Source: Market Oracle).
Related article: Dealing with Trade Wars and the Electronic Component Shortage
Supply may be well above demand
According to projections by Deloitte, electric vehicle car production will reach 35 million units by 2030. However, this means that an ‘expectation gap’ will emerge, with the supply of electric vehicles being 14 million units above the expected consumer demand (Source: Deloitte).
It’s clear that EV manufacturing is a booming area and the demand for electric vehicle components will only increase.
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