News Apr 26

Global carmakers brace for longer semiconductor shortage

Manufacturers say they are managing the situation on a day-by-day basis and while trying to avoid shutting down production lines completely, corners are being cut

Global carmakers brace for longer semiconductor shortage
A worker helps builds a Ford Explorer car at the company's Chicago Assembly Plant. File photo by Reuters.

(ATF) Recent buyers of the French-made Peugeot 308 car might have noticed a strange anachronism - instead of the snazzy digital speedometer on the dashboard, there's a circular analogue gauge.

But Stellantis, the manufacturer, would rather not provide such retro features. Instead, the global chip shortage has forced the company to devise workarounds to keep production moving.

It was able to resume making the new 308 at half its normal pace - and only after a three-week halt.

Now what was initially played down as a brief hiccup in the supply of semiconductors looks more and more like a shortage that may last throughout the year in what would be a big blow to automakers.

"An improvement in the short term is not to be expected" said Volkmar Denner, chief executive of Bosch, a major supplier of components for automakers. "Our entire industry will probably be confronted by this unsatisfactory situation for months to come," he added.

The shortage of chips has pushed automakers to idle production lines for brief periods when they temporarily run out of supplies. Toyota, Volkswagen, Ford, General Motors (GM), Fiat, Jeep, Honda, Jaguar Land Rover and the Chinese startup Nio have also had to pause production in their factories in the past few months.

Automakers have reduced the stocks of parts they keep on hand in recent years as part of cost-cutting measures, so delivery delays can quickly force an entire shutdown. 

The surge in demand for electronic devices during the pandemic is the main cause of today's shortage of chips, while a fire in a Japanese factory and a drought in Taiwan have exacerbated the supply squeeze.

DROP IN PRODUCTION

The main manufacturers are located in Asia, such as TSMC in Taiwan and Samsung and SK Hynix in South Korea.

Renault CEO Luca de Meo told shareholders this past week that "the semiconductor shortage could cause a drop in production volume this year of at least 100,000 vehicles."

In Germany, thousands of workers were on reduced work hours or temporary unemployment as Volkswagen and Mercedes-Benz factories were forced to halt production.

Fiat slowed production at its Brazilian factory for the second time this month, while the Stellantis factory in Rennes-La Janais in France, where 2,000 people work, was also nearly idle.

Computer processors are a key element in today's vehicles, which can easily have several dozen to control elements such as the engine, automatic braking system, airbags, automatic parking system and the entertainment system. 

Automakers say they are managing the situation on a day-by-day basis and while they are trying to avoid shutting down production lines completely, corners are being cut.

"GM is building some vehicles without certain modules when necessary," the US carmaker said in a statement. "They will be completed as soon as more semiconductors become available."

With reporting by Agence France-Presse

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