Lack of small parts disrupts auto factories around the world

Car manufacturers prepare for turmoil when a pandemic strikes. They expect supply chain disruptions and a sharp drop in sales. But they never thought that a year later, one of their biggest problems would be PlayStations.

Strong demand for gaming systems, personal computers and other electronic devices of a world stuck indoors has sucked up supplies of semiconductors, forcing automakers all over the world has to contend with the chips that have become essential to mobility like gasoline or steel.

Almost no car company is forgiven. Toyota Motor has discontinued production lines in China. Fiat Chrysler Automobiles has suspended production at factories in Ontario and Mexico. Volkswagen has warned about production problems at factories in China, Europe and the United States. Last week, Ford Motor said it had shut down a plant in Louisville, Ky., For a week because of a shortage.

When the Covid-19 was launched, carmakers cut chip orders in anticipation of a drop in sales. At the same time, semiconductor manufacturers have shifted their production lines in response to rising orders for chips used in products such as laptops, webcams, tablets, and electricity. 5G smartphones.

Businesses are also upgrading their digital infrastructure to handle online meetings and home workers, while telecom companies invest in broadband infrastructure. Continuously boosting demand for semiconductors.

Then car sales rebounded faster than expected by the end of 2020, keeping everyone off guard. The chip shortages that ensue are expected to extend into 2021, as it can take six to nine months for semiconductor manufacturers to redesign production.

“Consumer electronics boom,” said Dan Hearsch, chief executive officer of consulting firm AlixPartners. “Everyone and their brother wants to buy Xbox and PlayStation and laptops while the car stops working. Then the car came back faster than expected, and that’s where you come across this problem. “

While the shortage is not expected to drive up car prices much, buyers may have to wait longer to get the right car.

The chip shortage is rooted in long-term drivers that are reshaping the automotive and semiconductor industries, as well as the short-term confusion caused by the pandemic.

Over the past decade, automakers have increasingly relied on electronics to increase the appeal of their products, adding features such as touchscreen displays, engine controls and gearboxes. built-in computer, cellular and Wi-Fi connectivity, and a collision avoidance system that uses cameras and other sensors.

Industry analysts and consultants say new cars may have more than a hundred semiconductors, and a lack of even a single component could cause production delays or shutdowns.

The long-term pressure on chipmakers to control production costs also plays a role. The semiconductor companies that supply the automotive industry, such as Infineon, NXP Semiconductors and Renesas, have chosen to have their most advanced chips due to external manufacturing services, called foundries. . But manufacturers also maintain their own factories to make simpler automated chips, often fabricating them on 8-inch silicon wafers instead of the 12-inch plates used in modern factories. than.

Manufacturers whose factories use older 8-inch wafers do not easily increase output. Syed Alam, global head of semiconductor consulting at Accenture, said that recently it hasn’t invested much in new equipment, it’s harder to find now because the technology is older.

Geopolitics also play a role. The Trump administration in September placed restrictions on Semiconductor Manufacturing International Corporation, China’s main foundry, making car chips and many other applications. Gaurav Gupta, vice president of research firm Gartner, said company customers began looking for alternatives, creating additional competition for chip supplies from other foundries.

The chip crisis is an example of how the pandemic has rocked the global economy in unpredictable ways. Automakers are expected to face supply chain shortages, and factories close early in 2020 out of fears that workers will contaminate each other or shipping companies. Road load has stopped delivery. Most US auto factories ceased production for about two months last spring.

But automakers and carmakers were quick to find ways to stop the spread in factories and get assembly lines back on track. The impact on most of the parts offered was less frightening.

The semiconductor shortage stems from the left field, hitting an industry critical moment. Sales have declined worldwide. In Europe, for example, they are down 25% by 2020.

All of this is happening while automakers are trying to navigate the fundamental technological shift from internal combustion engines to batteries, which has already faced new competition from Tesla. The California company has become the world’s most valuable auto maker by far and is emerging. Chinese manufacturers like Nio.

Exactly how long the shortage will last is unclear. Michael Hogan, Senior Vice President at GlobalFoundries, a major chip maker serving the auto industry and it can take 20 to 25 weeks from new orders to make chips and run. through the supply chain. other markets.

“We are doing everything we can to make it a priority for cars first,” said Mr. Hogan.

German car electronics supplier Bosch says the shortage is particularly serious for integrated circuits used to control engines, transmissions and other vital functions. “Despite the tough market situation, Bosch is doing everything it can to keep its customers supplied and keep any extra impact to a minimum,” the company said in a statement.

Automakers and suppliers are responding the best they can. Honda says it is not stopping any production lines but is giving priority to its most popular models. BMW, based in Munich, says it has been able to maintain production but is “observing the situation carefully” and is in regular contact with suppliers.

German supplier Continental, known for its tires but also for making electronic components, has called on semiconductor manufacturers to increase the capacity of chip foundries.

“Investing in the future in these foundries will therefore be critical so that the auto industry can avoid such supply chain fluctuations in the future,” Continental said in a statement.

Infineon, based in Munich, said it is stepping up investment in new production capacity by 2021 to reach € 1.5 billion, or $ 1.8 billion, from € 1.1 billion in year. 2020. The company is also ramping up production at a new chip plant in Villach, Austria, that will produce 12-inch wafers.

But it will take time for semiconductors to catch up. Meanwhile, PlayStations takes precedence.

“Cars are back and they’re no longer a premise for chips,” said Gary Silberg, global head of automotive practice at KPMG.

Neal E. Boudette and Hisako Ueno contributed to the report.