Carmakers slow production due to chip shortage

12 January 2021

Automotive manufacturers have slowed car production as they struggle to obtain semiconductor components amid a global shortage. 

Firms such as Volkswagen, Toyota and Fiat Chrysler have reported bottlenecks in the semiconductor supply chain as suppliers are playing catch up following Covid factory closures.

There has also been a sharp rise in chip demand due to technological advancements in car systems, as well as long lead times.

Volkswagen told Reuters: “The chip supply for certain automotive electronic components has been affected due to uncertainties caused by the pandemic. 

“This has led to a potential interruption in China’s overall automotive production, with the situation getting more critical as demand has risen due to the full-speed recovery of the Chinese market.” 

Many semiconductor component suppliers, including Dutch automotive chip supplier NXP Semiconductors and German firm Infineon Technologies AG, have responded to the shortage by increasing production and raising prices, according to Reuters.

Components are in high demand for the automotive industry as new cars are being fitted with technological functions such as bluetooth connectivity and driver assist, navigation and hybrid electric systems.

Kristin Dziczek, vice president of industry at the Center for Automotive Research, told ABC News there have been warnings of this issue for months as it typically takes six to nine months of lead time to get chips "via a complex web of suppliers". 

“There's still some coming through, just not the volumes that they thought there would be,” Dziczek added.

German automotive parts producer Continental said potential bottlenecks may continure throughout 2021. “Although semiconductor manufacturers have already responded to the unexpected demand with capacity expansions, the required additional volumes will only be available in six to nine months,” it said.

Meanwhile, carmakers are coordinating with suppliers to deal with the situation, while some have also changed production strategies to allocate available chip supplies to certain priority models.

Toyota spokesman Scott Vazin told ABC News the shortage was an “industry issue” and they were working to “evaluate the supply constraint of semiconductors and develop countermeasures to minimise the impact to production”.

Fiat Chrysler said it was halting production of slower-selling vehicles to enable continued production of popular pickup trucks and SUVs.

"This will minimise the impact of the current semiconductor shortage while ensuring we maintain production at our other North American plants,” it said.

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