Global shortage of semiconductors compels car makers to halt production

A global shortage of semiconductor computer chips continues to disrupt the automotive supply chain, with Toyota and Volkswagen among the latest crop of manufacturers forced to restrict production.

Semiconductors – a crucial component for modern infotainment systems, driver aids and various electrical components – are in particularly high demand because of a pandemic-driven surge in demand for consumer electronic devices, including games consoles, laptops and tablets. 

Honda will pause production at its Civic factory in Swindon next week, due to a lack of the components – the third time in two months that the brand’s UK line has been forced to halt by supply bottlenecks. It currently plans to restart production on Friday 22 January.

Toyota’s Chinese production lines were hit earlier in the week, while Audi and Volkswagen are reported to have reduced the working hours of nearly 19,000 German workers in light of the shortage.

A Volkswagen spokesman told Autocar UK: “So far, we haven’t quantified the full volume impact as we continue to work intensively with our suppliers to minimise shortages. However, we expect the ramifications to continue at least in the first quarter, with potential to recover any lost volume later in the year.

“Another issue we’re dealing with is the second wave of the Covid-19 pandemic and how it’s affecting not just our manufacturing operations but also the crucially important supply chain. Where employees or supplier staff are shielding or ill, that is of course resulting in pressure on productivity and supply – although of course our main focus is on protecting our own and our suppliers’ staff.

“Like many UK companies, we made intensive preparations for Brexit, including ensuring a healthy quantity of stock in the country to cover any short-term logistic issues.”

Meanwhile, in the US, Ford’s plant in Louisville, Kentucky, was idled earlier this week as the manufacturer was forced to pause production of its Escape and Lincoln Corsair models. Fiat Chrysler Automobiles took similar measures at its factories in Mexico and Brampton, Canada.

India too is being affected for the global shortage of semiconductors. In early December 2020, Bosch Ltd, one of the leading suppliers to the domestic automobile industry, had confirmed the same. 

In a regulatory filing issued on December 8, Bosch Ltd said: “The demand in the consumer electronics industry has seen steep escalations driven by safety and hygiene sentiments as well as the rise of 5G connectivity. This led to a surge in global demand of semiconductors, a critical component in manufacturing of automotive electronics. As an outcome, imports of Bosch Ltd has been impacted with severe supply shortage for Imported micro-processors (semiconductors), leading to reduced ability to deliver to the automotive market demand in India. Restoration of normalcy in global supply situation for imported components and impacts are being very closely assessed and addressed on top priority.”

India’s ACMA pushes for localisation
Speaking about the development, Deepak Jain, president, ACMA, mentioned that, “ACMA is keenly watching the situation as it unfolds. It is still not clear as to what extent and for how long the shortage of semiconductors will impact vehicle production in India. Any stoppage of vehicle lines has a resonating effect on the entire automotive component manufacturing ecosystem. We are continuing to engage with the OEMs and monitoring the situation.”

“The electronic content in vehicles has been progressively increasing and incidents such as these only precipitate the need for localisation and self-reliance in automotive electronics in the country,” added Jain.

Macro role of microprocessors
Semiconductors form an integral part of a modern-day automobile ranging from passenger cars to buses and even two-wheelers. From driving basic things like digital radio tuners, electronic power steering, and door-and-mirror controls to complex mechanisms such as LED lighting, telematics and V2X communication for ADAS functionalities, these microprocessors are at the core of the vehicle, increasingly transforming it into an electronic-intensive piece of engineering. As vehicles transform into computers on wheels, it is microprocessors and semiconductors that are essaying the key role in the transition.

Furthermore, with the growing adoption of electric mobility, these semiconductors are further going to enhance their contribution and become deeply integrated in the neural networks of a vehicle to drive a predominant set of functionalities of what are seemingly the vehicles of the future. 

Consumer electronics vs automotive
The problem is being exacerbated by the fact that global car sales are recovering from a dramatic dip as a result of the pandemic in 2020, when semiconductor manufacturers – themselves forced to largely close for several weeks at the same time – ramped up supply to other industries as global lockdowns were eased. 

According to Bloomberg, consumer electronics producers are higher-value customers for semiconductor manufacturers as they place higher orders than car manufacturers. The site estimates that a billion smartphones alone are produced each year, compared with fewer than 10 million cars.