CHIP SHORTAGE NEWS Global chip shortage 2022 - updates in November
How are companies responding to the chip shortage and what are policymakers commenting? Here we sum up the most important events related to the global shortage of microchips.
The chip shortage continues in 2022. While some experts believe that the situation will improve this year, others are convinced that the crisis will persist into 2023. This article is updated continuously and summarizes the most important chip shortage news in August 2022.
The chip shortage could go on until 2027, says industry leader
With the passing of time, it’s becoming apparent that the goalposts for the potential “end” of the ongoing chip shortage are constantly being moved as unprecedented supply constraints continue on for longer than anybody could have accurately predicted. While Ford and General Motors now both believe that the chip shortage will continue throughout 2023, another industry leader thinks that the problem is poised to get even worse still over the next few years, before it eventually gets better.
John Sicard, CEO of supply chain management firm Kinaxis, has recently said in an interview that the semiconductor crisis would continue not until 2023 or 2024 but until 2027. The earliest the chip shortage can be resolved is 2025, he said, but on the other hand, there’s a chance it could take the world up to five years to align chip production with pent-up demand.
"As things stand today, we're seeing chips that used to cost $5 go all the way up to $85, which is proving to be a real problem," said John Sicard, CEO at Canadian-based Kinaxis, a supply chain management firm. "Even if customers are willing to pay, manufacturers simply can’t make enough for everyone," Sicard added, "In my opinion, the semiconductor supply crunch is here to stay for another three to five years,” he said.
Ford hopes to clear vehicle backlog by the end of 2022
As the automotive industry continues to struggle with limited semiconductor supply, leading automaker Ford has said that it has around 40,000 unfinished vehicles sitting in parking lots waiting for chips. Although Ford is confident that all these vehicles will be in the hands of customers by the end of the year, they cannot be completed until there’s a sufficient supply of chips for critical systems.
Despite Ford remaining hopeful that they’ll be able to get this backlog of vehicles out to customers in the near future, the company says that it’s unlikely that any significant improvements in overall chip supply will happen any time soon. According to Ford CFO John Lawler, a “significant relief” in terms of this supply is very unlikely in 2023.
Japanese automaker Toyota (see below) has also been hit hard by the lack of chip supply and the rising cost of materials. This has forced the automaker to halt production at more than half of its domestic facilities this month and reduce the number of electronic keys given to customers to one rather than the standard two.
Stellantis sees revenue boost as chip shortage eases
Stellantis, the automaker behind popular Fiat and Peugeot vehicle models, has reported a boost to its revenue over the past few months as the ongoing shortage of semiconductors shows some signs of easing. The company’s revenues rose by nearly a third to €42.1bn (£36.4bn) in the three months to September. The group’s sales of battery electric vehicles jumped more than 40 % in the period, to a total of 68,000 units.
In a recent interview with the French newspaper Le Parisien, Stellantis boss Carlos Tavarsen said, “The situation will remain very complicated until the end of 2023, then will ease a little. Semiconductor manufacturers have an interest in making [sic] business with us again, especially as they’re raising prices.”
However, some commentators are saying that semiconductor supply constraints are easing earlier than expected after many automakers have absorbed the huge cost of scrapping the production of millions of units of vehicles.
Toyota reports a 25 % reduction in quarterly profit
Japanese automaking giant Toyota reported on Tuesday, November 1, that its profits fell 31 % in the most recent quarter as the ongoing semiconductor shortage offset foreign exchange gains from a weaker yen. The company’s three-month profit for July to September came in at 434 billion yen (or US$2.9 billion), down from 627 billion yen a year earlier.
The automaker has faced many challenges over the last year, including rising interest rates, high materials costs, and volatile exchange rates. Ongoing semiconductor shortages and coronavirus lockdowns in Shanghai have also had an impact.
"We sincerely apologize for the inconvenience caused to our customers who are waiting for their vehicles. We are working to deliver them as soon as possible," Chief Officer Masahiro Yamamoto told reporters.
Jaguar Land Rover delays persist despite a financial rebound
UK automaker Jaguar Land Rover (JLR) has narrowed its losses for the three-month period to the end of September, but the company remains unable to meet the demand for its most profitable vehicles due to the ongoing semiconductor shortage.
JLR lost £173 million in the quarter, compared with £302m in the same quarter in 2021, as sales to dealers rose by 18 % to 89,899 units, according to company figures. At present, JLR is sitting on an order backlog of 205,000 cars, of which are for the Range Rover, Range Rover Sport, and Land Rover Defender.
“Demand for our most profitable and desired vehicles remains strong,” CEO Thierry Bolloré said in a statement. The company has benefitted from a 38 % increase in sales in China, which became it biggest retail market in the last quarter, overtaking Europe, where sales were down 10 %.
UK used car sales in Q3 fell below 2 million for first time since 2015
Sales of used cars in the UK fell for the second consecutive quarter this year, dropping by 12.2 % over the three months of July to September. 1,785,447 vehicles changed hands during this period, marking the first time that used car sales have dropped below 2 million since 2015. This is yet another impact of the ongoing semiconductor shortage, which has been battering the automotive market for almost two years.
SMMT CEO Mike Hawes said: “Given the short supply of new cars due largely to sustained chip shortages, a declining used car market comes as little surprise, although it’s great to see a growing number of used buyers able to get into an electric car. The demand is clearly there and to feed it we need a buoyant new car market, which means giving buyers confidence to invest.”
It's not all bad news, though. The market for used hybrid electric vehicles grew by 2.5 % in the same quarter, with some 41,479 vehicles switching hands. This takes the yearly total to 119,722 so far. Combined transactions for electrified vehicles reached 4 % market share in the third quarter, up from 3.3 % a year before.
Top automaker reckons inflation could help solve the chip shortage
The automotive sector continues to be blighted by the global shortage of semiconductors despite analysts once saying that it should have been over by now. Although everyone now agrees that the shortage will continue for a while longer yet, nobody can say exactly how long for.
The CEO of Bosch, Stefan Hartung, believes that the lack of chips will remain a problem in the automotive industry until the second half of 2023. In other words, some signs of recovery should become more noticeable in approximately one year.
Hartung also believes that rising levels of inflation could also help to alleviate the pressure. He says that skyrocketing inflation that’s been experienced across Europe and the wider world will eventually impact demand for semiconductors, which in its turn will help tackle the shortage.
This of course isn’t the best way to deal with the shortage. Rising inflation and falling demand would inevitably lead to the opposite of the current situation: Lower sales despite having the right amount of chips available.
Jaguar Land Rover eyes up partnerships to improve chip supplies
UK automaker Jaguar Land Rover (JLR) is thought to be eyeing up key partnerships in a bid to improve semiconductor supplies and improve sales volume in the second half of the current financial year.
In recent financial results, JLR reported revenue of 5.3 billion pounds and wholesale volumes (excluding China JV) of 75,307 units, up 18%, as compared with the July-September period of 2021. The company noted that despite strong demand and a record order book, sales during the second quarter continued to be constrained by the global chip shortage.
"Partnership agreements with several semiconductor suppliers and more in progress are expected to enable improving volumes in the second half of the financial year ending March 2023 and beyond," JLR said in its interim report for the second quarter and six-month period ended September 30.
JLR noted that with strong demand continuing, the client order book at the end of the second quarter stood at 2.05 lakh units.
The chip shortage is leading to rising counterfeits
The flow of counterfeit components typically increases during shortage, and microchips aren’t immune. According to a recent report by Europol, counterfeiters have been leveraging the global supply shortage of semiconductor chips to introduce counterfeits to the market.
“Supply chains are global and vulnerable to the introduction of counterfeits since typically several distributors handle components before they reach the manufacturing sites. Tracing the original supplier of the counterfeit semiconductors can be difficult when trademarked counterfeit chips are verified by the semiconductor firms,” the report says.
The big problem with counterfeit components is that producing them is an attractive prospect for criminals who could make a lot of money from them. It’s also very difficult, expensive, and time-consuming to catch and prosecute counterfeiters. As the Europol report also points out, disruptions in supply chains and the possible introduction of counterfeit components have the potential to cause serious failures in critical infrastructure.
“The risk of privately used electronic devices being affected is also high. Additionally, counterfeit electronic devices may also feature malware and other harmful software, adding the risk of data theft,” says the report.
Japan to invest $690 million in a new semiconductor venture
Japanese officials have announced that they intend to invest an initial 70 billion yen (US$690 million) in a new semiconductor venture led by Sony Group and NEC Corp, as it seeks to re-assert itself as a leading manufacturer of advanced chips.
The new venture, a chip company named ‘Rapidus’, aims to begin making chips in the second half of the decade, Japan’s Economy, Trade, and Industry Minister Yasutoshi Nishimura said during a recent news briefing. “Semiconductors are going to be a critical component for the development of new leading-edge technologies such as AI, digital industries, and in healthcare,” he said during the announcement.
The ministry will grant 70 billion yen to Rapidus to lead a research and development project for next-generation semiconductors, said Chief Cabinet Secretary Hirokazu Matsuno without elaborating. It's estimated that Rapidus will develop and mass-produce next-gen semiconductors by 2027.
You have missed some chip shortage news? This is what happened before:
- Global chip shortage 2022 - updates in Oktober - click here for reading!
- Global chip shortage 2022 - updates in September - click here for reading!
- Global chip shortage 2022 - updates in August - click here for reading!
- Global chip shortage 2022 - updates in July - click here for reading!
- Global chip shortage 2022 – updates in June - click here for reading!
- Global chip shortage 2022 – updates in May - click here for reading!
- Global chip shortage 2022 – updates in April - click here for reading!
- Global chip shortage 2022 – updates in March - click here for reading!
- Global chip shortage 2022 – updates in February - click here for reading!
- Global chip shortage 2022 – updates in January - click here for reading!
- Intel ramps up investments in EU chipmaking operations - click here for reading!
- Earthquake in Japan: How big is the effect on chip production? - click here for reading!
- Global chip shortage - outlook for 2022 - click here for reading!
- Update: These are the latest developments on the chip shortage in 2021 - click here for reading!
- Fire at Renesas: chip production to be resumed - click here for reading!
- Global chip shortage threatens auto industry supply chains - click here for reading!