Chip shortages slow vehicle production
January 11, 2021
A widening global shortage of semiconductors for auto parts is forcing major auto companies to halt or slow vehicle production just as they were recovering from COVID-19 pandemic-related factory shutdowns.
Officials at Volkswagen AG, Ford Motor Co, Fiat Chrysler Automobiles NV, Toyota Motor Corp and Nissan Motor Co all say they have been hit by the shortage and been forced to delay production of some models in order to keep other factories running.
“This is absolutely an industry issue,” Toyota spokesman Scott Vazin said in an e-mail on Friday. “We are evaluating the supply constraint of semiconductors and developing countermeasures to minimize the impact to production.”
If the chip shortage lasts, production cuts could reduce the inventory of cars, trucks and sports utility vehicles (SUV) for sale in the US and other markets.
That comes at a time when the industry was just starting to replenish inventory lost when factories shut down last spring to stop the spread of COVID-19.
Toyota was forced to slow production of the full-size Tundra pickup at a factory in San Antonio, Texas. Ford had scheduled down time this week at its Louisville, Kentucky, assembly plant, but moved it ahead to next week. The plant makes the Ford Escape and Lincoln Corsair small SUVs.
Fiat Chrysler has temporarily closed factories in Brampton, Ontario, and a small-SUV plant in Toluca, Mexico, while Volkswagen last month said that it was facing production slowdowns due to the shortage.
Nissan said it has had to adjust production in Japan, but has so far not seen a significant impact in the US.
Industry officials say that semiconductor companies diverted production to consumer electronics during the worst of the COVID-19 slowdown in auto sales last spring.
Global automakers were forced to close plants to prevent the spread of the virus. When automakers recovered, there were not enough chips.
“There have been warning signs about his for months,” said Kristin Dziczek, vice president of industry at the Center for Automotive Research, an industry think tank.
It takes six to nine months of lead time for the industry to get chips via a complex web of suppliers, Dziczek said.
She said she hopes that some of the lead time had passed when the issues began surfacing several months ago, making this a short-term rather than long-term problem.
“There’s still some coming through, just not the volumes that they thought there would be,” Dziczek said.
In many cases, automakers have stopped making slower-selling vehicles to divert the chips to hotter segments of the market, including pickup trucks and SUVs.
“This will minimize the impact of the current semiconductor shortage while ensuring we maintain production at our other North American plants,” Fiat Chrysler said in a statement.
The auto industry is using more semiconductors than ever before in new vehicles with electronic features such as Bluetooth connectivity and driver assist, navigation and hybrid electric systems.
Vehicle sales plunged during the first wave of lockdowns in April last year, but have since recovered significant ground.
US new vehicle sales were down 34 percent during the first half of last year, but recovered to end the year down only 15 percent.
The shortage in chips required in increasingly automated vehicles is the latest example of how the chip industry’s ebbs and flows can have ripple effects across industries.
Schools districts last summer scrambled to get orders filled for laptops for students still largely going to classes remotely as PC makers struggled to secure processors and other components.
The problems started when overseas factories making the chips were forced to shut down in the pandemic’s early stages.
The problem was exacerbated in July after US President Donald Trump’s administration imposed sanctions on 11 Chinese companies for alleged labor abuses.
To make matters worse, the schools found themselves competing for laptops against deeper pocketed companies that were also placing huge orders for employees while they worked from home.
Chip shortages also forced Apple Inc to push back the rollout of its latest lineup of iPhones until late October and early November, more than a month later than when the trendsetting company usually releases its top-selling device.
The global semiconductor market is expected to be worth about US$129 billion in 2025, nearly triple its size in 2019, research firm Mordor Intelligence said.