2025 auto chip shortage: what it means for nvidia, tsmc, and asml

2025-06-02 general

Shanghai, Monday, 2 June 2025.
The automotive industry faces a potential semiconductor shortage in 2025. This could disrupt supply chains and impact car manufacturers. The Yole Group’s automotive white paper offers insights. Chinese OEMs are increasingly sourcing semiconductors locally, challenging established global suppliers. This shift and potential shortages could affect major chip suppliers like NVIDIA, ASML, and TSMC. Their automotive chip orders and overall market stability are at stake. Investors should monitor the situation closely as the automotive sector’s transformation accelerates, with semiconductors playing a crucial role in electric and autonomous vehicles.

Rare earth element export restrictions

Adding to the challenges, China’s slow approval of rare earth element exports could disrupt the supply of critical components for automotive manufacturing [3]. Rare earth magnets are essential for various car parts, including motors and anti-lock braking sensors [5]. The Alliance for Automotive Innovation, representing major automakers, warned of potential production shutdowns due to shortages [5]. This situation creates uncertainty for investors, as it could lead to decreased production and reduced demand for semiconductors, impacting the financial performance of companies like NVIDIA and TSMC [5].

Volvo pauses production amid shortages

Volvo Cars has already paused production at its South Carolina plant due to ongoing supply chain disruptions and component shortages [4]. This plant is crucial for producing the electric Volvo EX90 [4]. Such disruptions highlight the fragility of the automotive supply chain and the potential for further production cuts if the semiconductor shortage worsens [4]. Investors should consider these vulnerabilities when assessing the risk associated with automotive-dependent semiconductor companies.

US-China trade tensions exacerbate risks

Trade tensions between the US and China add another layer of complexity [3][6]. The US has imposed restrictions on exporting certain technologies to China, while China has limited rare earth exports [3][6]. This tit-for-tat approach could further strain the semiconductor supply chain and negatively affect companies relying on international trade [3]. According to Nanjing University Professor Zhu Feng, China’s restrictions on rare earth exports are a response to US pressure on technology and industry [3]. Investors need to monitor these geopolitical dynamics and their potential impact on the automotive and semiconductor industries.

China’s dominance in rare earth processing

China dominates the rare earth element processing industry, controlling over 90% of mining and 99% of refining [6]. This dominance gives China significant leverage in the global supply chain [6]. The US relies on China for processing rare earth elements, even when they are mined by companies like MP Mining in the US [6]. This dependence creates vulnerabilities for automotive manufacturers and related semiconductor companies if trade relations sour further [6]. Investors should factor this geopolitical risk into their investment decisions.

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semiconductor shortage automotive industry