Semiconductor Shortage Forces Automobile Production Cuts
"Officials at Volkswagen, Ford, Fiat Chrysler, Toyota and Nissan all say they have been hit by shortages and forced to postpone the production of some models in order to keep other factories going."
A increasing global shortage of semiconductors for auto parts is forcing major car companies to stop or delay the production of vehicles just as they were recovering from factory shutdowns due to pandemics.
Officials at Volkswagen, Ford, Fiat Chrysler, Toyota and Nissan all say they have been hit by shortages and forced to postpone the production of some models in order to keep other factories going.
Industry officials say that semiconductor companies diverted production to consumer electronics during the worst of COVID-19 sales slowdown last spring. Global automakers have been forced to close plants to prevent the spread of the virus. There wasn't enough chips when automakers recovered.
The industry needs six to nine months of lead time to get chips through a complex supplier network.
When overseas factories producing the chips were forced to shut down in the early phases of the pandemic, the problems began. After the Trump administration placed sanctions on 11 Chinese firms for alleged labor violations, the issue was worsened last July.
At a factory in San Antonio, Texas, Toyota was forced to delay production of the full-size Tundra pickup. Next week, Ford had planned down time at its assembly plant in Louisville, Kentucky, but pushed it forward to this week.
Fiat Chrysler briefly shut down factories in Brampton, Ontario, and a small-scale SUV factory in Toluca, Mexico, while Volkswagen said it faced production slowdowns due to the shortage in December. Nissan said it had to shift production in Japan, but in the U.S. it has not seen a big effect so far.
Automotive manufacturers have also stopped manufacturing slower-selling cars to switch the chips to targeted market regions.
Fiat said "This will minimize the impact of the current semiconductor shortage while ensuring we maintain production at our other North American plants.”
New vehicles that have electronic features such as Bluetooth communication and driver assistance, navigational systems and electric power systems, the automotive industry uses more semiconductors than ever before. Semiconductors usually are silicon chips that perform memory and control functions for items from computers and mobile devices to cars and microwave furnaces.
According to Mordor Intelligence, the global demand for semiconductors is projected to hit approximately USD 129 billion in 2025, almost three times its size in 2019.
The scarcity of chips needed in increasingly automated cars is the latest example of how the ebbs and flows of the semiconductor industry can have product ripple effects.
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