Financial hit from chip shortage a reminder that digital tech has quickly become the car industry’s most important asset

Summary

The global computer chip shortage continues to upend the auto industry this year as Ford indicated that total quarterly output would be down 20% because of it. This includes a hit to the company’s and country’s top selling vehicle, the F‑150. Separately, GM announced this week that it would pause production at three plants in North America because of the shortage.

Report

Analysis

This chip crisis highlight show a disruption to digital technology has an immediate impact on company financials because of the direct impact technology has on productivity. Car companies have become significant purchasers of semi-conductors in recent years because they have all embraced digital transformation to varying degrees. Cars now rely on chips for everything from running the engine to operating a dashboard. Customers have come to expect a seamless digital experience in their vehicles. The aggressive move to electric vehicles will only further accelerate this trend of a greater reliance on digital technology.

And this doesn’t even touch on the extent to which production facilities have been digitized.

Chips are now every bit as valuable to the car and car companies as engines. With this shift, investors should be looking closely at how well or poorly companies are managing the digital technology. Why? Cyberhedge indices offer proof that future winners and losers in the car industry will be defined by how well or poorly they execute on digital transformation.

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These first ever benchmarks prove good cyber governance matters to shareholder value. They measure stock market performance of companies with good and with bad cyber governance scores. Scores are based on Cyberhedge’s proprietary cyber governance rating methodology. Market performance is tracked by an independent firm. The results show that companies with good cyber governance outperform their peers in US, UK, and EU markets.

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