Current semiconductor chip shortages are slowing global automotive manufacturing. What was initially dismissed as a brief hiccup in semiconductor supply is now looking more and more like a year-long shortage, which would be devastating to automakers.
They planned to ramp up production this year to meet an expected surge in consumer demand as the pandemic faded, as well as to recover from last year’s losses. However, with insufficient chips, those hopes are fading.
Computer processors are an important component in today’s automobiles, which have numerous management components such as the engine, automated braking system, airbags, automated parking system, and infotainment system.
The shortage of chips has pushed automakers to idle production lines for brief periods when they temporarily run out of supplies.
Stop and go manufacturing
Because of the chip shortage, automakers have had to temporarily shut down production lines when they ran out of supplies. Toyota, Volkswagen, Ford, Peugeot, Fiat, Jeep, Honda, Jaguar Land Rover, and even the Chinese startup Nio have had to halt production in recent months.
As part of cost-cutting measures, automakers have reduced the stocks of parts they keep on hand in recent years, so delivery delays can quickly force an entire shutdown. This week, Renault CEO Luca de Meo told shareholders that “the semiconductor shortage could cause a drop in production volume of at least 100,000 vehicles this year.”
Thousands of autoworkers in Germany were forced to work fewer hours or go on strike after Volkswagen and Mercedes factories were forced to halt production. Fiat reduced output at its Brazilian plant in Betim for the second time this month. The Stellantis factory in Rennes-La Janais, France, which employs 2,000 people, was also nearly empty.
Essential chips
Computer processors are an important component in today’s vehicles, which can have dozens of them to control things like the engine, automatic braking system, airbags, automatic parking system, and infotainment system.
Although there are still some factories in the United States and Europe, the main manufacturers are in Asia, such as TSMC in Taiwan and Samsung and SK Hynix in South Korea. The increase in demand for electronic devices during the pandemic is the primary cause of today’s chip shortage. A factory fire in Japan didn’t help, and now a drought in Taiwan may force a reduction in output.
Automakers adapt
Automakers say they are managing the situation on a daily basis and are attempting to avoid completely shutting down production lines.
Because of the chip shortage, “GM is building some vehicles without certain modules when necessary,” according to a statement from the American automaker. “They will be finished as soon as more semiconductors become available,” the company added.
After a three-week hiatus, Stellantis was able to resume production of the new Peugeot 308 at half the normal rate. It reverted to a dashboard console with an analogue speedometer. The majority of automakers say they hope to make up lost production in the second half of the year. Current semiconductor chip shortages, which are slowing global car production, “can be compensated for by the end of the year,” Daimler CEO Ola Kallenius said in a statement.
End of the tunnel?
Others are more pessimistic.
“A short-term improvement is not to be expected,” said Volkmar Denner, CEO of Bosch, a major supplier of automotive components. “This unsatisfactory situation will most likely plague our entire industry for months to come,” he added.
As the consumer electronics industry prepares for peak manufacturing, French auto component maker Faurecia does not expect an improvement before the end of the year. “The third quarter is critical for the production of Christmas goods. For the fourth quarter, we can be more optimistic “Patrick Koller, the company’s CEO, stated.
According to Iris Pang, a Taiwanese economy specialist at ING, the chip shortage could last until next year or even 2023. Due to the drought, authorities have ordered firms in areas where chip factories are located to reduce their water usage. “When they have more semiconductor orders, this has started to make semiconductor factories nervous,” she told AFP.
