A global chip shortage has blamed the auto sector this year, cutting factory production by millions of cars and eroding the profits of billions of car companies.
Next year is expected to be as challenging as industry analysts are.
For months, car executives have expressed optimism that the problem will begin to subside by the end of the year. There is now a new view that chip shortages have turned from a short-term crisis to a structural disruption in the automotive supply chain that could take years to fully go away.
Semiconductor testing and packaging methods in Asia are a new obstacle to further constrain chip supply to automakers. Meanwhile, semiconductor makers are phasing out the low-tech, low-margin chips prevalent in new cars, raising concerns about the availability of those chips.
Automakers face two challenges. It’s a gaming plan to find the chips needed to keep the factory up and running today, and to secure long-term supplies, including manufacturing US-based semiconductors.
“After all, if you don’t make a feature-rich chip that’s only used by the automotive industry, all your work is at risk,” said Jim Farley of Ford Motor Company. Ltd.
Said in an interview.
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Some automakers have already redrawn their plans for 2022.
Chicago regional supplier CEO Peter Anthony recently cut volume forecasts for the first half of next year by 20%. However, he said the estimate is an informed estimate, as his customer’s orders change daily based on the availability of chips.
“Nobody knows,” said Anthony, whose UGN Automotive manufactures interior carpets and insulation for several Japanese automakers. “It’s a complete mess.”
The latest sign that the challenge of chip shortages isn’t over is expected on Friday, when major car companies report US third-quarter sales. Analysts expect third-quarter sales to decline after a strong spring as semiconductor shortages impact vehicle production and dealer lots with little or no inventory.
According to analysts and industry executives, the ongoing problem in the automotive industry dates back to the early days of the pandemic, when auto suppliers canceled their chip orders fearing sluggish demand. When car sales surged in the summer of 2020, consumer electronics companies absorbed most of their capacity, leaving auto companies and their parts suppliers short of chips.
A few failures have further reduced the availability of chips used in everything from antilock braking to multimedia displays. Power outages, fires at major semiconductor manufacturers, and other disasters disrupted chip production from Texas to Germany and Japan.
Today, the industry is facing further bottlenecks in the supply chain. Semiconductors manufactured by leading manufacturers such as Taiwan Semiconductor Manufacturing Ltd.
Will be sent to companies in Malaysia and other Southeast Asian countries for assembly and testing. These companies have recently faced production turmoil, partly due to restrictions related to the pandemic and the growing outbreak of COVID-19.
Part of the supply chain has a backlog of chips used in the automotive industry and other sectors, even if pandemic restrictions are eased, said Phil Amsrud, senior analyst at IHS Markit, a research firm specializing in automobiles. Expansion is expected. semiconductor market.
“These back-end companies operate with much thinner margins than semiconductor manufacturers,” Amsalud said. “For them to invest heavily in capacity, they need to be completely confident of short-term and long-term demand.”
He said companies looking to increase production capacity may have up to nine months for some of the manufacturing equipment needed to ramp up production.
This pause is the main reason why IHS recently significantly lowered its forecast for global vehicle production in 2022, about 8.5 million units lower than previous forecasts for a total of 82.6 million units. The company has alleged a production loss of around 10.6 million units this year. Due to supply chain disruptions, mainly chip shortages.
Consulting firm AlixPartners LLP forecast industry revenue of $210 billion this year due to chip shortages, nearly double the May forecast.
One factor that puts the automotive sector at a potential disadvantage is its reliance on older chips called microcontrollers. They have been used to electronically control engines, airbags and other vehicle functions for decades and are popular for their low cost and reliability.
However, according to IHS, about $400 billion worth of semiconductor companies have announced in their planned capacity expansions that will be directed to microprocessors.
According to RBC Capital analyst Joseph Spak, semiconductor companies lack incentives to invest in additional capacity for older technologies. He also said that while automakers are moving toward more sophisticated chips as they introduce electric and connected cars, the upgrade will expose them to more direct competition for chips with consumer electronics makers. Rice field.
“We believe there may be structural reasons that half capacity could limit car production over the next few years,” Spaak said.
The severity of the shortage has disproportionately affected automakers. For example, according to the research firm Autoforecast Solutions, Ford lost more production in North America than any other car company in the world. There are about 566,000 cars. But Ford officials said the situation was improving.
Ford’s short-term strategy includes securing a backup inventory of chips and signing direct contracts with semiconductor companies rather than relying on Ford’s direct suppliers. He also suggested designing some vehicle components that require fewer chips.
Meanwhile, General Motors Ltd.
For most of the year, we were able to avoid production cuts of the most profitable vehicles, heavy pickup trucks and SUVs. However, recently, shift work in truck factories has been canceled and earnings are expected to decline in the third quarter.
GM CEO Mary Barra said in September that the automaker was working directly with semiconductor makers to secure the chips.
“We’re going to make a big difference in our supply chain,” Rose said in an online interview conducted by Delta CEO Ed Bastian. “It’s a solvable problem, but it will be a bit long.”
write to Mike Colias at [email protected]
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