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CHIP SHORTAGE NEWS Global chip shortage 2023 - updates in February

From Luke James Reading Time: 12 min |

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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 global chip shortage emerged in 2020 and is an ongoing problem where the demand for integrated circuits such as computer chips is greater than supply.
The global chip shortage emerged in 2020 and is an ongoing problem where the demand for integrated circuits such as computer chips is greater than supply.
(Source: Quardia Inc. - stock.adobe.com)
Skip to chip shortage news in November 2023

Land shortage threatens TSMC production in Kikuyo

As Taiwan Semiconductor Manufacturing Co. (TSMC) prepares to launch production in Kikuyo, a shortage of industrial land threatens to undermine the regional development effects that authorities desire.

Companies in their droves have been flocking to the Kyushu region to capitalize on TSMC’s first full-scale manufacturing operation in Japan, with operations set to begin by the end of 2024. Fearing that these plans could be hampered if the land is not made available, Kumamoto Prefectural Government has started promoting the conversion of agricultural plots to industrial sites.

According to a report released by the Ministry of Land, Infrastructure, Transport, and Tourism in September 2022, industrial land in Kikuyo logged the steepest rate of increase across Japan, at 31.6 %. A 2022 survey by Kumamoto Bank found that roughly 80 % of 27 Japanese and foreign companies that considered setting up operations in Kikuyo abandoned such plans because they failed to secure land plots.

Stellantis boss says car prices will fall this year

Stellantis’ chief executive has warned that prices will fall this year as manufacturers revert to discounting their prices, ending a period of discipline caused by the global chip shortage. The company, which owns Keep and Peugeout, reported a 26 % increase in earnings last year, and a profit margin higher than its 2030 target.

Net profits at the group rose by a quarter last year to EUR 16.8bn, while revenues rose 18 % to EUR 179bn, despite a 2 % fall in vehicle sales to 6 million. Its adjusted operating margin of 13 % was above 11.8 % for 2021, and higher than the 12 % target it had set for 2030.

Following these results, CEO Carlos Tavares said that carmakers will come under pressure to revive sales incentives later this year. “Pricing power will be under pressure, which means we are back to the situation we knew a few years ago,” he said in an interview with the UK’s Financial Times. “We all have to go back to the fundamental sales and marketing tactics that for the last three years have just disappeared.”

Jaguar Land Rover changes waiting list strategy

Jaguar Land Rover is prioritizing the production of "high margin" models as it endeavors to recover from a global chip shortage. Its flagship Solihull plant in the UK, which sits at the core of this plan, has found success in boosting production of more expensive models as it continues to navigate the chip crisis.

Jaguar bosses recently told reporters that the success of their decision to prioritize certain models has been reflected by their return to profit. Company accounts for the three months to December 31, 2022, report a profit before tax was £ 265 million - up from a loss of £ 9 million a year ago.

A spokesperson for Jaguar Land Rover said: "We continue to actively manage the operational patterns of our manufacturing plants whilst the industry experiences global semiconductor supply chain disruption.

Kansas chosen as location for USD 1.9 billion chip facility

Kansas Governor Laura Kelly announced on February 20 that EMP Shield, a manufacturer of commercial and residential devices that protect against high-altitude electromagnetic pulses, will invest USD 1.9 billion in a computer chip production facility in the state.

EMP Shield will build the 235,000-square-foot factory complex on 300 acres in the new Silicon Prairie Industrial Park and said six of its out-of-state suppliers will also set up shop there, producing additional components and getting the chips ready for final delivery.

Kelly indicated that the investment would lead to the production of thousands of new chips per week and create 1,200 new jobs. The project is part of the Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act signed into law in August 2022.

"This high-tech advanced manufacturing project will provide lucrative career opportunities for hard-working Kansans," said Lieutenant Governor and Secretary of Commerce David Toland. "Our economic development strategy is designed to keep nurturing the roots of our young talent so they can remain here in Kansas."

GM signs deal to avoid future chip disruptions

General Motors has signed a “first-of-its-kind” deal with GlobalFoundries to lock in its supply of crucial semiconductors, a move that’s designed to avoid the disruptions caused by the recent chip shortage.

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As per the terms of the agreement, GlobalFoundries will manufacture the chips at its semiconductor facility in New York. The company has said it would invest USD 1 billion to build a second factory near its Malta, New York, headquarters.

General Motors, like all automakers, relies on chips to power a range of features in its vehicles. The deal with GlobalFoundries will also provide a boost to the company, which is reeling from the impact of the chip shortage that has plagued the auto industry for the past few years.

“With this strategy, chips can be produced in higher volumes and are expected to offer better quality and predictability, maximizing high-value content creation for the end customer,” said General Motors in a recent statement.

Renault India’s production plans hampered by chip shortage

French auto major Renault’s India production plans for 2023 have been hampered by the global chip shortage, says CEO Venkatram Mamillapalle. “We cannot say that the semiconductor shortage issue is over. It is there a little bit. But it is not as bad as last year,” Mr. Mamillapalle said in a recent interview.

When asked about Renault’s plans for 2023, Mamillapalle said, “We are not launching any new cars in 2023. We keep refreshing our product line-up. We have recently upgraded our entire range (Kwid, Triber, and Kiger) to meet the government’s BS-6 Step 2 emission norms along with enhanced safety features.”

During CY22, Renault India sold over 1.14 lakh cars, of which 27,232 units were exported. For CY23, the company plans to retain the same numbers.

Several chipmakers reveal plans for new European plants

The European Union (EU) is looking to boost semiconductor production after a global shortage has caused widespread issues over the course of the last few years.

Under the European Chips Act, the European Commission is set to allocate 15 billion euros to public and private semiconductor projects by 2030. This funding will help the likes of Infineon, Intel, and STMicroelectronics establish new operations in the EU.

Infineon, which builds chips used in cars, was recently given the go-ahead to begin work on a 5 billion euro semiconductor plant in the German city of Dresden. Meanwhile, Intel has picked the German city of Magdeburg as the site for its new mega chip manufacturing complex while STMicroelectronics says it plans to build a 730 million euro SiC wafer plant in Italy.

The world’s largest contract chipmaker, Taiwan Semiconductor Manufacturing Company Ltd (TSMC), is also reportedly in talks with suppliers about setting up its first European plant, also in Dresden. However, TSMC has remained tight-lipped: "We do not rule out any possibility but there is no concrete plan at this time," a spokesperson said in a recent statement.

Honda says chip shortage is ‘bottoming out’ but cuts global sales forecast

Automaker Honda has said that the global semiconductor shortage is “bottoming out”, but still cut its global sales forecast and warned that tight supplies are likely to drag on into the second half of 2023.

Japan’s second-largest automaker cut 250,000 units of its sales outlook for the current fiscal year ending March 31, citing ongoing chip supply problems and uncertainty surrounding coronavirus in China. Honda now expects worldwide volume to dip under the 4-million-level to 3.85 million units.

The new sales target would register as a 5.4 % sales decline from the previous fiscal year, as opposed to Honda’s previous forecast for a slight overall sales increase. Total volume is far below Honda’s global production capacity of 5.14 million.

“We are starting to see the situation bottom out,” Operating Executive Eiji Fujimura said in early February. “I think we will see better procurement of semiconductors around that time [October 2023 to March 2024]” Fujimura said, while announcing a 22 % increase in quarterly operating profit.

Nissan profits grow despite chip shortage

Nissan reported a 55 % jump in October-December on Thursday, February 9.

Profit for the quarter at Nissan totaled 50.6 billion yen ( USD 386 million), up from 32.7 billion yen the previous year. Quarterly sales surged 29 % to 2.8 trillion yen (USD 21 billion), as a shortage of chips that has hit the world's automakers gradually eased, according to the company.

The chip crunch was principally caused by coronavirus-related lockdowns and other restrictions, which hindered Nissan's ability to deliver vehicles to customers. Some buyers have been waiting for more than a year for certain vehicle models.

Chief Executive Makoto Uchida acknowledged the quarter had been extremely challenging while expressing optimism for the future. “The new models we introduced in each market have been very well received by customers,” he said, while also saying that he doesn’t want customers to be waiting so long for their cars.

Toyota reports 8 % drop in fiscal Q3 profits

Toyota reported an 8.1% drop in fiscal Q3 profits (Oct-Dec), as the global shortage of computer chips and rising raw material costs continue to batter automakers.

The company’s fiscal Q3 profits totaled 727.9 billion yen (USD 5.6 billion), down from 791.7 billion yen the previous year. Toyota said it was doing its best to find other chips suppliers to keep up with demand, while material and energy costs reduced profitability.

Despite this, the company kept its global vehicles sales forecast for the fiscal year ending March unchanged, at 10.4 million vehicles. This would mean little change from what it sold in the previous fiscal year: 10.38 million vehicles.

Toyota expects to earn 2.36 trillion yen (USD 18 billion) in profit for the full fiscal year, unchanged from its earlier forecast. That’s lower than annual profit of 2.85 trillion yen reported last year.

Nissan keeps its profit forecasts while cutting unit sales target

Nissan reported that it maintained its full-year profits forecast on Thursday, February 9, while saying that it expects chip shortages and Covid-related disruptions to negatively impact sales volumes and vowed to fight back with “strict financial discipline”.

This means that the Japanese automaker still expects to turn a net profit of 155 billion yen (USD 1.2 billion) in the 2022-23 financial year. The company trimmed its annual unit sales target by 8 % to 3.4 million vehicles, however, predicting more production setbacks due to "semiconductor supply shortages, and the impact of the spread of COVID-19 infections in China".

Net profit in the nine months up to December dropped 43 % year-on-year to 115 billion yen, Nissan said. In the third quarter, however, net profit increased by 55 % compared to the same period in the previous year.

"Strong currency fluctuations and increases in raw material prices continued to have a significant impact in the third quarter," with sales volumes driven down by the chip shortage and resurgent Covid-19 infections, Nissan said in a statement.

General Motors and GlobalFoundries enter into new deal

General Motors and chipmaker GlobalFoundries said on Thursday, February 8, that they had signed a long-term deal for the automaker to secure U.S.-made processors that will enable it to avoid future chip shortages that prevented millions of cars from being manufactured during the coronavirus pandemic.

GlobalFoundries said the agreement, which will last for at least three years, was the first of its kind. It establishes a dedicated capacity of chips exclusively for GM’s key chip suppliers at their upstate New York fabrication facility.

The announcement came two days following President Biden praising the passing of the US$52 billion Chips and Science Act in his State of the Union address. The major bipartisan legislation aims to increase chip manufacturing in the United States and points to a new approach by automakers to securing semiconductors.

GlobalFoundries Chief Executive Tom Caulfield told Reuters, "This is the automaker going right to the manufacturing foundry, reserving the capacity for their needs, making the appropriate co-investments with that foundry so that the best economics take place."

Skoda suspends production as chip shortage bites

At a time when everyone else seems to be hailing the potential end of the chip shortage, Skoda is struggling with a lack of semiconductors. As a result, the automaker had no other option than to temporarily halt the production of several models on January 30.

The temporary production halt was revealed by trade unions, who also confirmed that Octavia, Enyaq, Fabia, Scala, and Kamiq are all impacted by the production cut. "After optimistic first weeks of the year, the production situation has been worsening again," the unions said in the weekly bulletin Skodovacky Odborar.

While some analysts believe that the end of the chip shortage is nigh, most automakers aren’t that optimistic. Several companies have already warned that semiconductor supply struggles would continue this year, with the most pessimistic forecasts anticipating supply chain problems next year, too.

It’s expected that production will resume at Skoda very soon.

German EV chip factory could help to tackle chip shortage

A new EV chip manufacturing facility in Germany hopes to help tackle the chip shortage which has disrupted automakers worldwide.

That is according to a press release from German chip conglomerate ZF Friedrichshafen (ZF) and American chip maker Wolfspeed, which announces that the two companies will be collaborating to meet this demand with a new chip fabrication plant in Germany.

In the announcement released on February 1, Wolfspeed said that the upcoming factory “will be the world’s largest, utilizing innovative manufacturing processes to produce next-generation Silicon Carbide devices.”

The importance of the plant isn’t just due to its potential to churn out chips, however. A lot comes down to its strategic location in Saarland, a German state on the France-Germany border. From here, Wolfspeed says that it will be able to meet the demand for EV chips of Porsche in Stuttgart, BMW in Bavaria, and Mercedes in central Germany. Further, it would also be able to meet upcoming demand from Renault and Stellantis just over the border in France.

Toyota supplier Denso reduces profit forecast

Japan's Denso Corp, a leading supplier to Toyota Motor Corp, slashed its annual operating profit forecast by 12.5 % on Friday, February 3, as it warned a chip shortage could cause auto production cuts.

Denso, which is a major manufacturer of automotive parts and chips, reduced its full-year operating profit forecast to 420 billion yen (USD 3.26 billion) for the year to end-March, from 480 billion (USD 3.65 billion) yen expected previously.

Denso said the new forecast accounts for the ongoing impact of the coronavirus pandemic in China and the risk of vehicle production cuts due to the global semiconductor shortage, despite the efforts that are being taken to reduce costs.

Denso’s downward revision follows news in November that Toyota had lowered its vehicle production forecast for the current financial year through march from 9.7 million to 9.2 million. Denso, which specializes in systems for running gasoline engines and driving hybrid and battery-electric vehicles, brings in roughly 50 % of its revenue from Toyota.

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