News Brief

As Chip Shortage Continues Global Auto Majors Are Cutting Production And Shutting Down Plants

Bhaswati Guha Majumder

Apr 24, 2021, 10:26 AM | Updated 10:37 AM IST

The Ford emblem. (Wikimedia Commons)
The Ford emblem. (Wikimedia Commons)

As the ongoing global semiconductor shortage is affecting many car makers including Jaguar Land Rover and Ford, the designers, as well as chip manufacturers have warned that this crisis could stretch to 2022 or 2023.

As reported by the Financial Times, JLR will stop the operations at the Halewood and Castle Bromwich plants in England from next Monday for at least a week.

Meanwhile, Ford has extended shutdowns at 10 sites across North America and Europe. Ford’s Turkish plant will remain closed until June, while its UK component factories are also likely to be affected by the global chip shortage.

The German multinational automotive corporation Daimler AG also cut the hours of 18,500 staff due to lower production. But that is not it. Renault on 22 April warned that the situation would get worse.

Its overall sales dropped 1.1 per cent to over $10 billion in the first quarter and expected to lose tens of thousands of car production due to the current crisis.

Clotilde Delbos, who is a member of Renault's Board of Management said that the company doesn't want to give an estimate for the product that might be wrong “very quickly”.

“Two months ago, we said we think the peak will be in the second quarter, but we think there will be a lingering effect in the third quarter if not further… The visibility is deteriorating,” she added.

Under the chief executive Luca de Meo, the company is currently in the middle of a turnaround plan which involves reducing factory capacity by a quarter and shedding 15,000 jobs, as well as overhauling its brands.

Global Shortage Will Last Longer

The crisis first started with automotive chips that control car breaks, doors and windscreen wipers.

But now it has spread to consumer electronics also.

According to a Wall Street Journal report, Pat Gelsinger, the CEO of the semiconductor giant Intel said that the supply constraints that have already affected several industries across the globe will continue until additional capacities are built.

“This will take a while until people can put more capacity in the ground. It’s just the way it is when you’re building new factories,” he added.

The crisis highlights the disruptive effects of two back-to-back events—the US-China trade war and the Coronavirus pandemic—on the global supply chain.

The car industry, particularly, has been also hit by supply chain issues caused by severe cold weather in Texas in February and a fire accident at Renesas Electronics’ plant in Japan—one of the biggest chip makers for the car industry.

Volvo Group chief executive Martin Lundstedt said: “The global supply chain for semiconductors as well as for other components remains very unstable and the uncertainty . . . is high.”

Taiwan Semiconductor Manufacturing Co (TSMC), Intel and Nvidia have warned that the global crisis of semiconductors will last throughout the year and likely into the next, as new plants take time to come online.

However, in response to the chip shortage which has affected mostly the carmakers, the TSMC board has approved $2.89 billion in spending to increase capacity.

TSMC, which is the world's largest contract chipmaker, said in a statement that its board has approved the spending to install mature technology capacity.

But despite billions in fab investments, experts believe that the shortage could last for two more years.

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