Fire and ice aggravate chip supply headache for car industry

A fire at a semiconductor factory in Japan, cold weather in North America and ongoing competition for chips are all hitting the global auto industry at the same time, threatening to exacerbate supply shortages of a key component that began late last year.

File photo of a semiconductor chip (Bloomberg)
File photo of a semiconductor chip

A clean room at a plant run by Renesas Electronics Corp., one of the top providers of automotive chips, was damaged by fire on Friday, the company said. The incident will probably have a big impact on the car industry, Chief Executive Officer Hidetoshi Shibata said during an online news conference Sunday.

Global automakers were already coming to grips with a shortage of chips caused by booming demand for laptops, tablets and home electronics by people staying and working indoors during the pandemic. Now, with supply chains already under strain, they have to contend with bad weather and other unanticipated disruptions to keep up production and recover from the steep drop in 2020 sales due to the coronavirus outbreak.

“I’m concerned that this will have a very big impact," said Shibata, adding that Renesas is seeking to resume operations at the facility within a month and anticipates 17 billion yen ($156 million) in lost revenue because of the incident. “We’ll pursue every possible measure, including the use of output alternatives, to make the impact as minimal as possible."

Also Read : Chip shortages hit Japan car sales as Nissan, Honda cut output

Renesas gets about 6.6% of its revenue from Toyota Motor Corp. one of its main customers, according to Bloomberg’s Supply Chain Analysis. Renesas posted 715.7 billion yen in revenue last year. Toyota has also warned that cold weather-induced semiconductor shortages will force it to suspend a factory in the Czech Republic for two weeks.

“This is terrible for the automobile supply chain; they might have to move toward holding more inventory," Bloomberg Intelligence analyst Masahiro Wakasugi said of the Renesas fire. The big question is whether Toyota, which has been managing its supply chain better than other automakers, will be hit, he said.

The following automakers have warned of chip-induced disruptions during the past week:

  • Toyota said on Saturday that its Kolin plant in the Czech Republic, which makes the compact car Aygo for the European market, will be taken offline. The factory was hit by low supplies of semiconductors caused by production delays after the cold weather in the US.

Taiwan Semiconductor Manufacturing Co Ltd will prioritise production of auto chips if it is able to further increase capacity.
Taiwan Semiconductor Manufacturing Co Ltd will prioritise production of auto chips if it is able to further increase capacity. (Bloomberg)
Taiwan Semiconductor Manufacturing Co Ltd will prioritise production of auto chips if it is able to further increase capacity.
Taiwan Semiconductor Manufacturing Co Ltd will prioritise production of auto chips if it is able to further increase capacity. (Bloomberg)

Also Read : How Toyota thrives when the chips are down

  • Ford Motor Co. said the semiconductor situation and parts shortages created by the US winter storm in February will cause some production to be idled. F-150 trucks and Edge SUVs will be assembled without certain parts, including some electronic modules that contain scarce chips.
  • Nissan Motor Co. is adjusting production schedules in North America because of semiconductor shortages. Operations at Smyrna, Tennessee, and Canton, Mississippi, have been impacted, while the automaker’s Aguascalientes plant in Mexico will be offline Tuesday, according to Azusa Momose, a spokeswoman for Nissan.
  • Honda Motor Co. warned that some plants in the US and Canada will see disruption this week as the pandemic, a chip shortage and severe winter weather all impact its supply chain. The carmaker will halt work at plants in Marysville and East Liberty in Ohio, as well as others in Indiana, Alabama and Ontario, potentially for a week, it said.
  • Volkswagen AG’s Autoeuropa plant in Portugal will halt production from March 22-28 due to shortage of semiconductors.
  • BMW CEO Oliver Zipse said on Bloomberg Television the German automaker can’t guarantee it will avoid production stoppages related to the global shortage, though it’s avoided disruptions so far.
  • Mitsubishi Motors Corp. is reducing domestic output of vehicles by 4,000-5,000 units in March due to a shortage of semiconductors, and reviewing its production plans for April.

Cold weather in North America is also disrupting supplies of other raw materials used for automobile manufacturing.

Toyota warned last week that the cold front has reduced supply of petrochemical products, impacting production in the US and Mexico. Some lines, shifts or potentially entire plants are expected to be temporarily halted for several days in Kentucky, West Virginia and Mexico, the company said.

Toray Industries Inc. has warned buyers of its Nylon 66 fiber, used mainly for vehicle airbags, that it may not be able to fulfill its obligations to supply the product because it doesn’t have enough raw materials to make it due to the US cold snap.

First Published Date: 21 Mar 2021, 15:48 PM IST
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