More chip shortage woes could hit carmakers, suppliers in 2021

More production headaches could lie ahead for the auto industry as a semiconductor chip shortage complicates the recovery from last year's pandemic-related shutdowns, suppliers Robert Bosch and German chip maker Infineon warned on Thursday.

Global automakers have been caught off guard by the shortage of crucial semiconductors, used for everything for computer management of engines for better fuel economy to driver-assistance features such as emergency braking, highlighting the need to cut dependency on Asian manufacturers.

Volvo Cars also said that while it has so far avoided the chip shortages that have curtailed production at a growing number of automakers, there was still a risk it could be hit.

During a presentation of its 2020 annual results, Stuttgart-based car parts supplier Bosch said the ongoing Covid-19 crisis and the chip shortage would weigh on global automotive production growth in 2021.

Around 85 million vehicles will roll off assembly lines around the world this year, more than the 78 million units produced in 2020 but still below the 92 million cars produced in 2019, it said.

Global automotive production hit a high of 98 million units in 2017.

"We are quite positive," Bosch Chief Executive Volkmar Denner said, but he added "we still have a long way to go to catch up".

Bosch said it had not been left unscathed by what it called a bottleneck in the global semiconductor chip market.

US automaker General Motors Co said on Wednesday it will cut production next week, the latest manufacturer hit by the shortage after similar announcements by the likes of Volkswagen AG, Ford Motor Co, Subaru Corp, Toyota Motor Corp, Nissan Motor Co and Stellantis NV.

German chip maker Infineon said on Thursday it was facing challenges in meeting auto industry demand for microcontrollers due to capacity constraints at the contract manufacturers it relies on.

"Semiconductor shortages are being felt in the overall automotive supply chain," Chief Executive Reinhard Ploss said after Infineon reported forecast-beating quarterly results.

Volvo Cars CEO Hakan Samuelsson told Reuters his company, which is owned by China's Geely Holding, could be affected soon.

"There is of course a big risk that it could come here during the first quarter," Samuelsson said. "But it is very hard to forecast."

Europe needs to stump up cash to boost its chip industry, a board member of the continent's largest carmaker Volkswagen said, highlighting the dependence on foreign players.

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