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You may have noticed that it is hard to find new graphics cards and state-of-the-art game consoles today. This is largely due to a continuing global scarcity affecting semiconductor foundries. It turns out that the problem is even more pronounced in the auto industry. In fact, it’s getting so bad that a series of OEMs, including Ford and General Motors, have had to go as far as idle shifts and even entire factories.
Ford had to stop production in Kentucky in December 2020 and in January ordered a one-month break at a German factory. Stellantis (the new company formed by a merger between Fiat Chrysler and Peugeot) reduced production at plants in the United States, Mexico and Canada at the same time. Like Audi, which had to leave 10,000 employees idle in Germany, CEO Markus Duesmann said, telling the Financial Times that the problem involved “a very long chain with different levels of supply for the components we need”. Subaru’s Gunma plant in Japan was affected. Toyota’s Tundra production, produced in Texas, too.
This week, more visits continue to arrive. Mazda has just announced that it may have to cut production by 34,000 units this year due to a lack of chips. Nissan’s truck factory in Mississippi reduced its hours of operation. And on Wednesday, GM said it would halt production at its factories in Kansas, Canada, Mexico and South Korea. In many cases, automakers are trying to prioritize their most demanded products, but as some of these closings show, this is not even it is always possible.
Why is this happening?
As you can expect, the problem has its roots in the coronavirus pandemic. As countries around the world imposed new public health rules, automakers cut production and dealerships and showrooms closed to prevent the disease from spreading. As sales declined, OEMs dropped orders for semiconductor chips, dozens of which go to each new car to control almost everything. Likewise, chip makers have reduced their production of these chips in response to falling demand.
As restrictions on COVID-19 have eased in some places, demand for new vehicles has returned, but automakers have a problem. In the absence of automotive orders, foundries and factories have changed their ability to fulfill other orders. And despite its size, the auto industry is actually a small fish when it comes to buying chips, accounting for about a tenth of global semiconductor production. Consequently, the bottleneck should last for months.
Is everyone affected?
The problem did not affect the entire auto industry equally. For example, Toyota says it has diversified its supply chain and increased component inventory after the 2011 Japan earthquake and tsunami. And Hyundai Motor Group did not cancel any of its chip orders in 2020 due to COVID-19, so he is practically unharmed. But the blow to the sector was estimated at $ 61 billion.
Don’t expect the problem to be restricted to the auto industry only. On Thursday morning, Qualcomm warned that “shortages in the semiconductor industry are widespread”.