Semiconductor crisis: latest update - Oct 2021
Semiconductor crisis: latest update - Oct 2021
With the shortage of semiconductor processing chips impacting the automotive and technology industries, many leading car manufacturers have been forced to close production lines temporarily.
The crisis has affected companies for nearly a year. It initially arose from increased demand for smartphones, tablets and personal computers at the peak of the Covid-19 pandemic, which essentially redirected supply away from the automotive sector. It now extends to Covid-related closures at semiconductor factories and international shipping ports.
Analysis company IHS Markit said at the time that the shortage could reduce global production by almost 700,000 vehicles year on year, although the final figure could be even higher.
We have summarised how each car manufacturer is currently faring during the semiconductor chip shortage crisis.
Ford
Ford is still impacted by the semiconductor shortage, with the production of the Fiesta delayed from May to the middle of July. The firm’s Turkey-based factory, where the Transit is built, was also closed over the summer.
Some Ford models are being shipped with some features missing, including sat-nav, with retrofits required.
“I think the issue will be around for a while – probably until Q1 next year,” Ford fleet director Neil Wilson informed Fleet News. “It will ease, but there will be further challenges ahead, and we have to be good at reacting to those challenges.”
Ford previously cut production output at its Cologne plant due to Covid-related supply issues from a chip producer in Malaysia, according to Automobilwoche, sibling publication to Automotive News Europe.
According to the Automobilwoche report, Ford's management announced in written communication to employees that short-time work would be requested for the next two weeks, starting on 17 August, due to a lack of door modules.
The firm said that the Ford Focus, also produced at the same facility, is not affected by the cuts.
Hyundai
According to Hyundai's global chief operating officer, Jose Munoz, they hope to create their own semiconductor chips to reduce reliance on external chip makers.
The Korean firm had said August and September were the “most difficult months,” but the worst had passed.
"The semiconductor chip industry is reacting very, very fast," Munoz said, who then added that Intel is investing to increase production.
Munoz added, "But also in our case, we want to be able to develop our own chips within the group, so we are a little bit less dependent on a potential situation like this,"
"This takes a lot of investment and time, but this is something we're working on."
Reuters reported that Hyundai aims to “deliver vehicles at the level of its original business plan in the fourth quarter, and offset some of its production losses next year.“
Jaguar Land Rover
JLR has warned leasing companies that the lead time for 53 model variants extends to over a year. The 2022-model-year Land Rover Defender, Jaguar E-Pace, Land Rover Discovery Sport, Land Rover Discovery, Range Rover Evoque models are all impacted, reported Fleet News.
In a recent statement, JLR announced, “Like other automotive manufacturers, we are currently experiencing some Covid-19 supply chain disruption, including the global availability of semiconductors, which is having an impact on our production schedules."
"We continue to see strong customer demand for our range of vehicles,”
“We are working closely with affected suppliers to resolve the issues and minimise the impact on customer orders wherever possible,” it added.
Mercedes-Benz
According to Fleet News, the German company had to briefly reduce its optional equipment list on some models to reduce delays from late June production until further notice.
Electronic options such as wireless mobile charging pads, a foot-operated boot release, LED headlights, and audio devices will be excluded on some models, impacting AMG-Line models most significantly.
“Regardless of the model, we take into account how long a customer has been waiting for their vehicle and try to prioritise accordingly,” Mercedes-Benz said.
“Nevertheless, handovers to customers are strongly dependent on the individual equipment and the short-term availability of parts.”
The firm anticipates the impacts of the shortages to last into the second half of this year.
Nissan
According to reports from the Sunderland Echo, the Japanese manufacturer's Sunderland plant has been feeling the impacts of the semiconductor shortage for six months.
“The global shortage of semiconductors has affected parts procurement in the automotive sector,” a Nissan spokesperson said.
"Due to the shortage, Nissan is adjusting production and taking necessary actions to ensure recovery.”
Toyota
According to Automotive News Europe, Toyota is set to reduce global car production for the third time in November. However, the Japanese firm still expects to have its most productive November ever.
While the semiconductor shortage is still impacting Toyota, the damage is not anticipated to be as drastic as Toyota is starting to see signs of recovery.
Toyota's global procurement manager, Kazunari Kumakura said, "I think we are over the worst period."
Toyota hopes to produce between 850,000 and 900,000 vehicles for global distribution, a 15% cutback from their target to make 1 million vehicles this November. Kumakura says Toyota would have hit the 1 million mark had supply issues not been an issue.
Output is also expected to recover from December onwards, though six of it’s 28 production lines are expected to shut in November, including four in Japan.
"We are now coordinating both internally and externally with our suppliers to see how much we can make a recovery in December and beyond," Kumakura said.
"We target a high production level for December and beyond, so we will try our best to make as many vehicles as possible."
In September, Toyota previously reduced production by 40% because of the worldwide semiconductor shortage and Covid-19 impacts in Asia.
The shutdown, which impacted 14 Toyota factories in Japan and 27 out of 28 production lines, lasted a whole month with significant impacts in Japan, Europe, China and the US.
Volkswagen Group
The German car manufacturer is still anticipating an uphill battle in the production of semiconductors.
"We currently expect the supply of chips in the third quarter to be very volatile and tight," VW informed Reuters. "We cannot rule out further changes to production."
Volkswagen said it is hoping the situation will improve by the end of the year and aims to make up for shortfalls in production during the second half as far as possible.
Audi previously increased its summer break by a week at its two Germany-based factories.
Meanwhile, SEAT paused some production operations in Barcelona last month, having opened its factory during the annual summer break to get back on track following a production shortfall earlier this year.
What is a semiconductor chip?
Semiconductors are predominately used to control electrical currents. The chips control most electronic functions of critical features such as battery management, brake sensors, parking cameras, infotainment systems, and vehicle power steering.
Depending on the complexity of the new vehicle, there can be anything between 50 to 1,000 semiconductors used during the build.
How will this affect leasing a new car or van?
“Worldwide stock of semiconductors will probably not return to pre-pandemic levels until sometime during 2022,” said Ash Jackson, Sales Manager at Fleet UK.
“It can take up to three to four months for a semiconductor chip to be created. Not only do semiconductor factories have to purchase and install the relevant tools, but you also have to factor in that it takes several weeks to produce the semiconductor chips as well.”
“The shortage of semiconductors is having a significant impact on the delivery turnaround time for some new cars and vans.”
“However, the good news is that we are still sourcing a wide variety of cars and vans from all manufacturers that are in stock.”
"Some unscrupulous firms might give customers an earlier lead time to help secure their order and provide the bad news a few weeks later."
"However, when a customer enquires about leasing a vehicle through us, we are honest when delivery is likely to happen from the outset and try to set the right expectations."
“If there are any unforeseen delays to delivery times, we always proactively keep the customer fully informed throughout the order process.”
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