Electronics and Semiconductors

Report: Incoming lithium battery shortage in 2022

12 January 2022
As automotive OEMs transition to electrified models and governments seek to meet climate change requirements, lithium battery supplies are not able to meet demand. Source: Pixabay

The struggle continues to find enough semiconductors for automotive OEMs into 2022, but with news that the shortage may be easing this year, another problem is emerging in a lithium battery shortage that could be much worse.

In a report from DigiTimes Asia, the supply chain for lithium batteries cannot meet upcoming demand.

The automotive market is in the midst of a radical transition. Every automotive OEM has pledged to move to primarily sell electrified models by 2040 with rapid development and release of electric vehicles (EVs) coming in the next 20 years.

This means more EVs need more lithium batteries and supply is not sufficient to keep up with this anticipated demand, according to the report. These batteries are the core power supply for all-EVs and without enough supply, vehicle production will be impacted, possibly jeopardizing the roll out of the EVs that are part of these companies plans to meet upcoming regulations for carbon emissions and their own personal goals of becoming net carbon neutral.

Additionally, EVs are growing with government policies as they seek to meet climate change requirements, putting further attention on lithium battery supplies.

The Biden Administration last year pledged to swap all U.S. government vehicles with electric models. In 2019, the government owned 645,000 vehicles with just 3,215 of these being electric, according to the General Services Administration. Biden also pledge to add 550,000 EV charging stations to help with infrastructure buildup.

These factors have added to the need for more batteries, and it is reaching thresholds where supply is falling short of demand. These factors will persist through 2022.

Chip shortage

The chip shortage began in late 2020 due to the outbreak of COVID-19, causing ripples through the supply chain and hitting the automotive market extremely hard as many automotive OEMs had paused the number of chips they need in production, anticipating a dry spell in sales.

When sales did not falter and automotive OEMs wanted to resume production, capacity was moved to consumer electronics and compute systems that were in high demand due to the lockdowns causing many students to learn from home and businesses to work at home. Part of the demand came from consumers wanting a safe space to avoid the pandemic or travel without having to fly with multiple people.

The chip shortage continued through 2021 even as semiconductor manufacturers ramped up production and tried to allocate more space for automotive chips.

In the meantime, automakers decided to take matters into their own hands by guaranteeing supply directly from suppliers. This included Ford and BMW both signing separate agreements with GlobalFoundries to directly send chips to these automotive giants for current and future supply.

BMW said the agreement is a strategic shift to build more secure and resilient supply chain partnerships and accelerate technology development for automotive technology. Every car contains several thousands of semiconductors for all the electronic devices inside. As more tasks get added to vehicles such as electrification, automation and wireless connectivity, even more semiconductors will be required.

General Motors said it is working with seven chipmakers to ensure a supply so that if one company has issues another can be swapped in. These companies include Qualcomm, ST Microelectronics, TSMC, Renesas, NXP Semiconductors, Infineon and ON Semiconductor.

To contact the author of this article, email PBrown@globalspec.com

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