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You can have noticed that it is difficult to grasp new high-end graphics cards and game consoles these days. This is largely due to a continuing global shortage affecting semiconductor foundries. It turns out that the problem is even more pronounced in the automotive industry. In fact, things are getting so bad that a number of OEMs, including Ford and General Motors, have had to go as far as idle shifts and even entire factories.
Ford had to shut down production in Kentucky in December 2020 and, in January, ordered a month-long hiatus at a German factory. Stellantis (the new company resulting from a merger between Fiat Chrysler and Peugeot) reduced production at factories in the United States, Mexico and Canada Around the same time. Just like Audi, which had to idle 10,000 employees in Germany, CEO Markus Duesmann told the Financial Times that the problem involved “a very long chain with different levels of supply on the components we were missing”. Subaru Gunma factory in Japan was affected. The production of the Tundra produced in Texas by Toyota was also produced.
This week, more hits keep coming. Mazda Just announced it may have to cut production by 34,000 units this year due to a lack of chips. Nissan’s Mississippi Truck Plant has reduce his hours. And on Wednesday, GM announced it would halt production at plants in Kansas, Canada, Mexico and South Korea. In many cases, automakers try to prioritize their most demanded products, but as some of these closures show, that’s not always possible.
Why is this happening?
As you would expect, the problem has its roots in the coronavirus pandemic. As countries around the world imposed new public health rules, automakers have cut production and auto dealerships and showrooms have closed to stop the spread of the disease. As sales have dried up, OEMs have cut back on solid-state chip orders, dozens of which are for every new car to control just about everything. Likewise, chipmakers have reduced their production of these chips in response to declining demand.
As Covid-19 restrictions have eased in some places, demand for new vehicles has returned, but automakers have a problem. In the absence of auto orders, foundries and factories shifted their ability to fill other orders instead. And despite its size, the auto industry is actually a bit of a minnow when it comes to buying chips, accounting for about a tenth of the world’s semiconductor fab production. Therefore, bottleneck should last for months.
Is everyone affected?
The problem has not affected the entire auto industry as well. For example, Toyota claims to have diversified its supply chain and increased its component inventory after the 2011 earthquake and tsunami in Japan. And Hyundai Motor Group hasn’t canceled any of its chip orders in 2020 due to Covid-19, so it’s virtually unharmed. But the success of the industry was estimated at $ 61 billion.
Also, don’t expect the problem to be limited to the auto industry only. Thursday morning, Qualcomm warned that “The shortage in the semiconductor industry is widespread.”
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