The shortage in the availability of chips could lead to a prolonged pause in production in the auto industry
Global car manufacturers are either slamming brakes on the production or closing down assembly lines in recent weeks due to the lack of availability of semiconductors. One of the key reasons being Donald Trump’s strict actions against Chinese chip manufacturing plants. Following the outbreak of the health crisis affecting economies, the automotive industry struggled a lot to get back to a stage of recovery.
In recent months, the growth has been rather steady and the semiconductor producers are struggling to meet the demand. This could lead to temporary stoppage of car production for months as auto giants such as Ford, Toyota and Subaru are lessening the roll outs in the United States while Volkswagen, Fiat Chrysler Automobiles and Nissan are also affected elsewhere.
The chip industry was running wild due to increased consumption of personal electronic goods such as gaming consoles and computers last year. Moreover, the demand in the volumes sales of passenger vehicles has also grown and thus the chip makers have their work cut out. In the United States, President Donald Trump’s move of reducing technology transfers to China, makes the scenario even worse.
The automakers are also looking at ways to move to different chip suppliers from other Asian countries in an aim to meet the shortage. Modern automobiles rely much on electronics and therefore lack of a small chip could curtail production. Ford’s Kentucky plant could not roll out models like the Escape SUV due to the unavailability of a chip used in the braking system.
The Blue Oval is also pausing production for a month at its Germany factory where the popular Focus is made. Since the chips born out of silicon wafer, the processing would consume at least three months for the final product to come out and it could only exacerbate the situation. In addition, the producers cannot expand their facilities in a whisker as it takes billions of investment.
On an average, it takes up to 12 months for testing tools and other complexities involved to be established. The impact could also be seen in our domestic market as Ford India’s factory in Maraimalai Nagar near Chennai is subjected to an extended closure for a week due to the disruption in supply chain for a critical component.