Thursday, July 7

Global Semiconductor Shortage Affecting Auto Production in China and Japan | porcelain

The current global shortage in semiconductor supply is affecting manufacturing in China and Japan, according to the data, with car production among the affected industries.

The shortage of semiconductor chips, which are the “brain” found within all kinds of electronic devices, from PCs and televisions to game consoles and cars, has haunted economies for more than a year.

Growth at factories in China has slid to a four-month low, according to Wednesday’s figures, as a result of a shortage of semiconductor chips, combined with supply chain problems and rising raw material costs. .

Japan has also seen the largest monthly drop in industrial production in a year, falling nearly 6% in May compared to the previous month, as manufacturing of cars and production machinery fell. The biggest drops came in auto production, which fell more than 19% last month, largely due to a lack of semiconductor chips, according to Japan’s Ministry of Economy, Trade and Industry.

The owner of UK car dealerships Evans Halshaw and Stratstone also warned on Wednesday that car supply is likely to be restricted during the second half of 2021.

Pendragon said in a business update that “vehicle ordering times are already getting longer.”

As demand for chips continues to outpace supply, the auto industry is forecast to be the biggest loser in 2021, with up to $ 20bn (£ 14bn) wiped out of global automakers’ operating profits this year. , according to estimates by Goldman Sachs.

Semiconductor manufacturers temporarily shut down their operations when the coronavirus first took hold in early 2020 and their customers cut or canceled orders, anticipating weaker consumer demand.

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However, the opposite happened, with shoppers rushing to buy computers and other electronic devices to entertain themselves during successive closings. The fear of Covid-19 has also driven car sales, as people avoid public transportation.

Although production has returned to normal, shortages persist, which continues to affect manufacturing in Asia.

“The shortage has been caused by a combination of better-than-expected demand and also a very bumpy recovery on the supply side,” said Toshiya Hari, a research analyst at Goldman Sachs.

“It takes a long time for semiconductor companies to increase production. It takes time to buy the tools. It takes time to install the tools. The actual manufacturing of the chips also takes a couple of months. “

Hari added that a semiconductor chip can take three to four months to produce.

Analysts warn that the global economy has entered a peak of chip shortages, with supply shortages expected to ease slightly in the third and fourth quarters of the year. However, the global semiconductor stock is not expected to return to pre-pandemic levels until 2022.

High demand for semiconductors is also expected to decline as economies open from locks and consumers start spending their money on vacations and hospitality, rather than electronic devices.

However, automakers are considered the most vulnerable to the current supply crunch.

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Automakers were among the companies that cut back on chip orders as vehicle sales fell early in the pandemic, but then found themselves at the end of the line when they tried to reorder. The automotive sector accounts for less than 10% of global semiconductor orders, which are dwarfed by those of technology companies such as Apple.

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The global auto industry will lose about 3% of annual production this year as a result of semiconductor shortages, according to estimates by analysts at Goldman Sachs. This equates to a $ 15-20 billion loss in operating profit for global automakers, according to research analyst Kota Yuzawa.

“It’s having a very, very big impact, especially in the used car market,” Yuzawa said. “If you take a look at the US auto market, the price of used cars has actually doubled over the last six months due to the special demand created by Covid-19 and also the shortage of supply and demand. of the vehicle itself ”.

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