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LAST STATUS: December 15, 2021 Update: These are the latest developments on the chip shortage in 2021

| Updated on 16.12.2021From Luke James

The ongoing chip shortage has had an impact on virtually every industry, sending traumatic ripples throughout global supply chains. From automobiles to games consoles and power supplies to graphics processing units, very few have been left unaffected. Here’s a look at the latest developments.

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The worldwide semiconductor shortage is expected to last until Q2 2022 at the earliest. This article will keep you up to date on the latest developments.
The worldwide semiconductor shortage is expected to last until Q2 2022 at the earliest. This article will keep you up to date on the latest developments.
(Source: ©Quardia Inc. - stock.adobe.com)

COVID-19 has caused problems for virtually every supply chain around the world. Long before the pandemic, however, the semiconductor supply was extremely fragile and inflexible. Over the last few years, a series of problems, along with the impact of the pandemic, has caused a chip shortage that is having a severe global impact.

From trade wars and geopolitics to natural disasters and a materials shortage, semiconductor production has been decimated and chipmakers are facing major woes as a result. This is all taking place while major countries and companies are in the race to lead global chipmaking. However, today’s chip market is extremely volatile, and this will continue to have an impact on chipmakers and lead to shortages for years to come.

Global chip shortage - new updates

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 chip shortage.

Production at Volkswagen’s Emden plant halted until January

Production at Volkswagen’s Emden plant in Germany has been halted for the remainder of 2021 due to the ongoing shortage of chips and the impact it’s having on the supply of critical electronic components, as reported by German auto publisher Automobilwoche. The automaker’s Emnden plant builds both the Arteon and Passat line of vehicles.

This latest shutdown means that by the end of the year, Volkswagen will have lost a grand total of 70 days’ worth of production due to short-time working, a Volkswagen spokesperson said, describing the cut in production as “massive”.
This is particularly troubling news for some industry spectators and enthusiasts as the Emden facility is expected to begin the production of ID 4—an all-electric Volkswagen SUV—within the next year. Volkswagen says that vehicle production will resume on January 10, 2022.

Toyota continues halt on production at its Japanese factories

Toyota has announced that it will be continuing to halt production at several of its Japanese factories as the region battles with the COVID-19 pandemic. Production of the Toyota Land Cruiser SUV as well as several Toyota Lexus models will be impacted, with latest estimates suggesting that as many as 14,000 vehicles will be lost.

According to Toyota in a statement to the British Broadcasting Corporation (BBC), the latest production halts were introduced because of a “lower attendance rate at suppliers in Southeast Asia due to the respread of Covid-19 and tight logistics situation in Japan”.
The latest shutdown marks the fourth time that Toyota has cut production in 2021. Six of its 28 factories were closed in November, while back in August production was cut due to COVID-19 and a fire at one of its biggest facilities.

Despite this setback, Toyota remains committed to its production target of 9 million vehicles.

Mercedes halts production for a month as of December 13

A Mercedes-Benz factory in Hungary has halted production for one month effective December 13 it has been reported by Automotive News Europe. The Mercedes-Benz facility is the largest industrial employer in the region and produced 160,000 cars in 2020 and employs a workforce of around 4,700. Production will resume from January 12. The factory currently builds many popular Mercedes-Benz models including the A-Classs, B-Class, CLA, and CLA Shooting Brake.

"Adjusting to the continuously changing component supply situation, the Mercedes-Benz plant in Kecskemét will modify its production plans from calendar week 50,” Daimler said. In response to the chip shortage and the resulting lack of components, some electronic options such as foot-operated trunk release, wireless charging pads, and LED headlights will be removed on some models. This will hit the automaker’s luxury ‘AMG’ line of vehicles the hardest.

Jaguar Land Rover continues to warn of long waiting times

British automaker Jaguar Land Rover (JLR) has renewed warnings of long waiting times for its latest vehicle models. The firm issued the warning to leasing companies that lead times for the company’s 53 model variants have now extended to over a year, with the 2022-model Land Rover Defender, Land Rover Discovery, Land Rover Discovery Sport and Range Rover Evoque, among others, being impacted.

In a statement to British automotive news site Autocar, JLR said, “Like other automotive manufacturers, we're currently experiencing some Covid-19 supply chain disruption, including the global availability of semiconductors, which is having an impact on our production schedules. We continue to see strong customer demand for our range of vehicles,”
JLR says that it is continuing to work closely with suppliers to resolve the issues and reduce the impact on customer orders.

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Ford CEO says chip shortage will last until 2023

The semiconductor shortage has had a huge impact on automotive production throughout 2021. As far as when the crisis might begin to ease up and perhaps even end, however, is a topic that has sparked fierce debate, with many industry leaders weighing in with their own thoughts and opinions over the last few months.

While some believe that we’re approaching the beginning of the end of the chip shortage, others such as Ford CEO Jim Farley have more pessimistic views. In a recent interview with Automotive News, Farley was asked if Ford was still considering sending unfinished vehicles to dealers due to the shortage. In response, he said, “I think we have to remain very open. We’re discussing it today still… We think this will last through 2023 to some extent, and who knows what next year holds for us?”
In the meantime, Ford is continuing to work around the shortage by removing certain features and offering stripped-down versions of its vehicles.

BMW signs long-term deal to secure access to chips

BMW has signed a long-term deal that will provide the German automaker with access to semiconductors for in-car lighting systems following a shortage of the components that has forced the company to halt operations at some of its factories. The automaker said on Wednesday, October 15th that it signed an agreement with Inova Semiconductors and GlobalFoundries Inc., guaranteeing the supply of “several million” chips per year. These chips will be used in controls for ambient lighting systems that are set to be used for the first time in the BMW iX electric SUV.

“We are deepening our partnership with suppliers at key points in the supplier network and synchronizing our capacity planning directly with semiconductor manufacturers and developers,” Andreas Wendt, a BMW board member, said in a statement.
BMW’s deal is another signal that automakers are swerving traditional makers of car components to instead work directly with chip manufacturers to secure vital supplies.

Volkswagen Americas CEO says shortage will last into 2022

The boss of Volkswagen AG’s Americas region says that he expects the global chip shortage to last into Q3 2023 at the earliest, but also believes that the automotive industry will maintain the discipline and management of the shortage that has enabled firms to remain strong and profitable during it.
While last year’s COVID-19 shutdowns and the chip shortage reduced vehicle inventories, they also led to strong profits for most automakers. VW Group of America’s CEO Scott Keogh remains optimistic that the auto industry can maintain profits without returning to historic bad practices.

"When the market springs back, it's not going to hold obviously exactly the way it is," he said in an interview. "It will grow more competitive, but directionally the trend that started with the housing crisis, that carried through COVID and the chip shortage, will hold true."

VW’s brand-new vehicle sales in the U.S. were up by more than 21 % in November as the industry rebounded from last year’s shutdowns, but Keogh says that growth in 2022 will be lower as the chip shortage lasts at least until the third quarter.

Chip delivery wait times grow as shortage drags on

Delivery times for chips grew again in November, trashing the hopes of many that the end of the semiconductor shortage might finally be in sight. Chip lead times, which is the closely watched gap between when a semiconductor is ordered and when it’s delivered, grew by four days to around 22.3 weeks last month when compared to October. This is according to research by Susquehanna Financial Group, who says that this is the longest lead time the firm has seen since it began tracking lead times in 2017.

The results are an unwelcome revelation for industries reliant on microchips, particularly firms in the automotive industry that has been battered by the shortage for most of 2021 and by the COVID-19 pandemic in 2020. Many automakers, and indeed many electronics manufacturers, are struggling to meet consumer demand.
“While the expansion is less than most months of late, we had hoped for a clear reversal,” Susquehanna analyst Chris Rolland said in a research note.

Nissan boss warns Omicron could make chip shortage worse

Nissan boss Makato Uchida says that the so-called Omicron variant of COVID-19 could add more pressure to the ongoing chip shortage, adding that it’s too early to say when normal deliveries, and therefore finished cars, will resume.
“I can’t give you a date. This new variant could add pressure to that, so how well we react is going to be crucial,” he said in an interview with the British Broadcasting Corporation.

The comments from Mr Uchida come as Nissan unveiled its latest vehicle electrification strategy, which includes the introduction of 23 electrified Nissan vehicles by 2030. It also includes the ambitious goal that, by 2026, 75 % of Nissan’s European sales will be electric vehicles. Earlier this year, Nissan announced a £1 billion investment that will turn its Sunderland, UK plant into a hub for electric vehicle manufacturing.

China’s auto sales drop for seventh month in a row

Latest figures have revealed that China’s auto sales dropped by 9.1 % in November when compared with the same time last year. This marks the country’s seventh consecutive monthly fall as the ongoing shortage of semiconductors continues to disrupt automotive sector operations. Overall sales for China, which has the world’s largest car market, stood at 2.52 million vehicles in November according to figures released by the China Association of Automobile Manufacturers (CAAM).

Despite the drop in sales when compared to 2020, overall November sales beat CAAM’s expectations, said CAAM spokesperson Chen Shihua, who admitted that the semiconductor shortage will continue to pressure the auto industry throughout December. Sales of new energy vehicles, such as battery-powered electric vehicles and plug-in hybrids, maintained a decent momentum thanks to government-backed drives to cut the country’s pollution levels. "Consumer acceptance of new energy vehicles continues to rise," Shihua said.

India’s auto sales dropped by 18 % in November

Passenger sales in India fell by double digits for the third month straight in November despite strong demand in the local market. The damning figure comes as the global shortage of semiconductors continues to limit production across global automakers. According to data from the Society of Indian Automobile Manufacturers (SIAM), passenger vehicle sales dropped by 18 % to 215,626 units. This includes the sale of Tata Motors, one of the country’s most popular automakers. Two-wheeler sales dropped by a much steeper 34 %, while sales of scooters dropped by 39 % to 306,899 units.
It’s important to note that these figures are dispatches from factories to dealers and not sales to customers because Indian automakers don’t report monthly retail sales.

The impact of disruptions in the global supply of semiconductors is clearly visible now as November saw a decline in PV sales, said Saket Mehra, partner and auto sector leader at Grant Thornton Bharat. "Despite the demand shooting up during the festive season, the [sic] passenger vehicle sales slipped 18 % YoY and 17 % MoM," he said. "As the semiconductor shortage continues to create an imbalance with reduced productions and stretched delivery period, the consumer sentiment is expected to dampen further,” he added.

Samsung says chip shortage will continue into Q3/4 2022

South Korean tech giant Samsung is the latest industry heavyweight to say, along with the likes of Intel, that the chip shortage isn’t likely to be over soon; Samsung reckons that the shortage will continue well into the second half of 2022. This is according to Samsung Mobile president TM Roh who said this during a meeting with senior Samsung executives and executives from over 30 of its major smartphone component suppliers.

As per a recent report, Samsung is taking steps to safeguard against the shortage, for example by pushing for annual contracts with chip foundries to secure production capacity. In addition, the company says it will now be stocking up to four weeks’ worth of chip supplies, double the two weeks’ worth of supplies it currently stocks.
Samsung’s latest smartphone, the Galaxy S21 FE, has been delayed due to the shortage and is now set to launch in January 2022. This pushes the launch of the Galaxy S22 line-up to February at the earliest.

Kia’s November sales fall by 13 %

Kia, South Korea’s second-largest automaker, said that its November sales fell by 13 % in November when compared to last year’s figures as the global chip shortage continues to affect its production. Kia sold a total of 222,232 vehicles, down from 256,215 vehicles a year earlier, the company said in a statement.

Domestic sales fell by 8.9 % year-on-year in November to 50,523, while exports were down 14 % to 176,190 from 205,69 during the same period. Kia said that the continued chip shortage and a resurgence of COVID-19 cases in the region are to blame for the drop in sales. The company also said that it will adjust its production schedules to minimize the shortage’s impact on its factory operations.

French car sales fall in November as automakers scramble for semiconductors

French new car sales fell by 3 % in November when compared with the same month last year, as the ongoing chip shortage ensures that the market remains around 29 % below 2019 pre-pandemic levels.

There were 121,995 passenger vehicles registered in France in November, the same as in 2020, according to the French automotive sector trade group PFA. While many brands had strong months, including Hyundai (up by 108 %) and Dacia (up by 67 %), total sales figures are still far below where they should be.Hyundai received a boost from the rollout of its third-generation Tucson SUV, which sold 16,428 units in November. In 2020, the previous generation Tucson achieved sales figures of 6,432.
Meanwhile, Volkswagen was down 22 %, Seat down 26 %, BMW down 6.7 %, and Audi down 1.8 %.

Chip shortage to continue into 2022 but with two "bright spots" – JPMorgan

While the global chip shortage is set to drag on into 2022, the situation could improve from the middle of the year onwards as more supplies become available. This is according to Gokul Hariharan, a leading analyst at JPMorgan.
“We are not expecting 2023 to be in supply shortage — so, that is probably the first thing that we can say,” said Hariharan, who is the co-head of Asia-Pacific technology, media, and telecom research at JPMorgan, in an interview with CNBC.

2022 will be a “little bit more tricky,” he said. Things could improve in the second half of the year as more supplies come online, but the first six months could still see effects of the shortage. More supply capacity will be coming online next year not just from foundry companies that build chips but also from integrated device manufacturers. This additional capacity will mean that more can be produced to meet demand, thus mitigating the impact of the shortage.

Chip shortage expected to cost Daimler Truck billions in revenue

The boss of Daimler Truck Martin Daum has said that he expects the global chip shortage to hit the company’s revenues by several billion euros this year and that he sees the problem continuing into next year, German auto news publisher Automobilwoche reported on November 28. Daum said there would be a significant financial hit for the company.

"It is a huge sum," Daum told Automobilwoche, saying the company will only be able to sell a "mid five-digit number", substantially fewer vehicles than normal. Given that Daimler has an average per unit price of 100,000 euros, it means several billions of euros in revenues will be lost.

Like many automakers, Daimler is also facing the problem of many vehicles not being able to ship because of one or two missing parts. "We also have many vehicles sitting in the factory where just one part is missing. These deliveries are a priority because they are already sold," said Daum.

UK records lowest October car output since 1956

New figures reported by the Society of Motor Manufacturers and Traders (SMMT) have revealed that British car output fell by an annual 41.4 % in October, its lowest October figure since 1956, as the global lack of semiconductors and widespread plant closures hit the sector.

UK car output in the first 10 months of 2021 was recorded as 721,505 vehicles, a reduction of 2.9 % on 2020 when sites were closed for months as the COVID-19 pandemic emerged. Latest figures also show that full-year car and van output will be below 1 million for the second consecutive year in the UK, but the SMMT says that figures are expected to return to above this level in 2022.

"Britain's automotive sector is resilient but with COVID resurgent across some of our largest markets and global supply chains stretched and even breaking, the immediate challenges in keeping the industry operational are immense," said Mike Hawes, Chief Executive of SMMT.

Suzuki’s November sales drop to 139,184 units

Suzuki reported that its total sales for November this year stood at 139,184 units, a significant reduction when compared to the 153,223 units sold in the same month last year. The drop came on the back of a slowdown in production due to the ongoing global chip shortage, says the automaker.

“The shortage of electronic components had a minor impact on the production of vehicles during the month. The shortage primarily affected the production of vehicles sold in domestic market. The company took all possible measures to minimise the impact," a spokesperson for Suzuki said in a statement.

In its miniature and compact car segment, the company recorded 74,492 units sold during November 2021, down from 98,969 units in the same month last year. Total passenger car sales stood at 75,581 units, down from 100,839 units.

Volvo warns that it sees chip shortage extending into next year

Volvo Cars warned on November 30, that the global semiconductor shortage will likely continue into next year. The warning comes as its first quarterly report since listing on the stock market a month ago illustrated a dip in both revenue and profit.
"The supply situation has improved going into the fourth quarter, but we expect the industry-wide shortage of semiconductors to remain a restraining factor,” said Chief Executive Hakan Samuelsson in a statement.

Volvo Cars, which is based in Gothenburg, Sweden, said that while supply chains are still constrained and the company is still struggling to meet demand, production had “improved month by month” since September. “[There are] no extra lockdown related problems,” Samuelsson said to Reuters.
Volvo’s initial public offering (IPO) at the end of October is the largest in Europe this year to date.

Japan to invest over USD5 billion to solve chip shortage

Japan is the world’s largest chip manufacturers, and it has seemingly had enough of the chip shortage. A recent announcement says that the country will commit around 600 billion Japanese yen (roughly USD5.2 billion) towards supporting semiconductor manufacturers and helping the world get ahead of the ongoing chip crisis. The money will be distributed to several chipmakers, most notably Taiwan Semiconductor Manufacturing Co (TSMC), the world’s largest contract chipmaker, which will receive 400 billion Japanese yen to build a new factory.

The remaining 200 billion yen will be spent on setting up other new facilities. Projects awarded include new factories being built by U.S. chipmaker Micron and Japan’s Kioxia Holdings. The news of this announcement comes as Japan begins to focus more on its domestic semiconductor production. The country recently introduced new legislation targeted at companies developing high-speed 5G technologies.

Indian auto sector faces worst festive period on record

India’s automotive sector, like most, is desperately trying to get past by the slump caused by both the pandemic and resulting semiconductor shortage. Unfortunately, however, it is experiencing another disappointing festive period. In the first month-and-a-half of the recent festive season in India, the vehicle sales across the country declined by almost 18 % when compared with last year’s figures. This is according to the Indian Federation of Automobile Dealers Associations, an autonomous body.

“We have witnessed the worst festive season in the last decade. [The] semiconductor shortage, which was already a full-blown crisis, showed its true colours…we could not cater to customers’ needs as SUV, compact-SUV, and luxury categories witnessed a huge shortage of vehicles,” said Vinod Gulati, the president of the Federation of Automobile Dealers Associations.

Other firms in India are feeling the impact, too. Last December, Bosch’s India unit had already warned of the potential issue of a semiconductor shortage, signaling its inability to cater to demand from consumers.

EU pondering subsidies to bolster chip production

The European Union is reportedly pondering subsidies to fund new semiconductor production, the European Commissioner for Competition Margrethe Vestager said on November 18. While all nations have felt the effects of the semiconductor shortage, the EU has particularly suffered due to its reliance on chips produced in Asia and its relatively small—and substantially diminished when compared to its peak—share in the global semiconductor supply chain. In the years gone by, more and more European chipmakers have outsourced their manufacturing to Asia to benefit from the cost savings.

"The Commission may consider approving public support to fill possible funding gaps in the semiconductor ecosystem for the establishment in particular in Europe of first-of-its-kind facilities," Vestager said in a speech to the European Parliament. The European Commission, which is responsible for overseeing antitrust policy in the 27 EU countries, says that if it were to introduce subsidies, that it would look to ensure such support was kept in check by strong competition safeguards and that any benefits will be shared widely and without discrimination across the European economy.

Morgan Stanley believes that the chip shortage is nearly over

The semiconductor shortage has been decimating the global auto and consumer electronics industries, forcing many carmakers to cut their production targets and temporarily close down their factory floors. While many automakers, electronics makers, analysts, and other industry specialists have said that the shortage is likely to continue well into 2022 and possibly 2023, Morgan Stanley thinks different – it says that the shortage is nearly over.

This is because of recent research by Morgan Stanley that suggest that Malaysia has resumed the production of chips at normal capacity, and that the rest of Asia will soon follow in its footsteps. Production in Asia has continued to falter due to the COVID-19 pandemic; Asia has been hard hit in recent months and this has caused many major fabs to halt production.
Whether this is true remains to be seen – there are still many issues that need to be resolved, including fragility of the semiconductor supply chain, that must be resolved before the chip crisis can be truly over.

The chip shortage is helping to boost U.S. manufacturing

While the chip shortage has caused serious worldwide problems, especially for automakers, the creation of increased production capacity in response is likely to lead to a long-term net benefit. One place where we’re already starting to see this is in the United States, where the chip shortage is helping to boost domestic manufacturing.

The U.S. government simply isn’t happy with how reliant the country is on Asian high-tech manufacturing, especially in areas like the economy and military, and the shortage has shone a glaring spotlight on the sorry state of U.S. manufacturing. This has led to what is currently a USD52 billion (and rising) government plan which includes huge levels of subsidy, funding, and a whole new legislative agenda.

"We don't want to create a situation where the United States, which created the semiconductor industry and Silicon Valley, would be completely dependent on other nations for that product," said Al Thompson, who leads Intel's US government relations.
Europe is also following suit. European Commission chief Ursula von der Leyen announced the ‘European Chips Act’ in mid-September, which is being introduced in a bid for the bloc to gain greater autonomy in chipmaking.

Nintendo considers at ‘alternative components’ to bypass chip shortage

Nintendo has finally weighed in on the ongoing chip shortage as it announced that it had been forced to downwardly revise its production targets for the Nintendo Switch handheld games console. As part of the company’s most recent earnings briefing, Nintendo president Shuntaro Furukawa said that there had not been a good enough improvement in the supply of semiconductors, which is why the company has now revised its production targets for the Switch down to 24 million.

In spite of this uncertainty, however, Furukawa said that game sales have not been impacted and that Nintendo will continue to promote its new and evergreen games to users as a way to “maintain the momentum of the Nintendo Switch business.” According to Nintendo executive Ko Shiota, Nintendo’s engineers are “reviewing” the hardware design of the Nintendo switch and are looking at sourcing “alternative components” in a way to get around the impact of the ongoing supply chain problems.

Sony halts orders of cameras due to chip shortage

Sony cameras are the latest victims of the global chip shortage that has multiple industries in a stranglehold. While Sony has been feeling the effects of the shortage like most other consumer electronics makers, especially due to the impossible-to-obtain PlayStation 5 console, the halting of the production of certain camera models is the latest setback for the Japanese electronics giant.
Sony has announced that due to part procurement delays, orders for the Sony A6100, Sony 6400, and Sony A7 II will be halted until further notice. This will no doubt come as disappointing news for many enthusiasts, especially those who were hoping to bag a bargain during the Black Friday sales.

Sony is not the only camera manufacturer suffering from chip shortage issues. Recently, there have been shortages of Canon EOS R3 stock and Fujifilm has apologized for delays in the Fujifilm 33mm F/1.4. Laowa has also delayed the release of its Argus 35mm f/0.95 lens.

Ford teams up with GlobalFoundries to secure more chips

Starved of crucial semiconductors, Ford has announced a collaboration with U.S. chipmaking giant GlobalFoundries to get its hands on more chips for its vehicle components. In an agreement that was announced on November 18, GlobalFoundries will make semiconductors for Ford vehicles and collaborate with the automaker on research projects.
Ford plans to initially use the chips in its hand-free driver assist and car battery management systems. The news comes as the automaker has been forced to leave these and other modern systems out of some of its vehicle ranges due to the shortage.

The chip shortage has caused Ford and most other major automakers to halt the production of new vehicles. So far, around 7 million cars that were due to be built this year have yet to be produced. Ford CEO Jim Farley said in a statement that the partnership is helping move the U.S. in the right direction towards the government’s ultimate goal of achieving “greater independence in delivering the technologies and features our customers will most value in the future."

Deloitte head says ‘no end in sight’ for chip shortage

It is becoming increasingly clear that the issues in the semiconductor supply chain are beginning to seriously harm the growth prospects of several companies.
At the end of October, both General Motors and Ford said that missing chips had led to a fall in Q3 profits while Apple is rumored to be cutting 2021 production targets for its iPhone product line. The situation is so dire and widespread, in fact, that Wells Fargo thinks that the shortage could cut U.S. GDP growth by 0.7 %.
The head of Deloitte’s semiconductor industry practice, Brandon Kulik, thinks that the shortage is going to “continue indefinitely” despite the hopes of many that things were beginning to rebound. “Maybe that doesn’t mean 10 years, but certainly we’re not talking about quarters. We’re talking about years.”

As with many long-term and widespread problems like the chip shortage, there’s no easy fix. And as demand for products and services that rely on these chips continues to grow across all markets, it seems as the only solution is to build more capacity – which takes time.

European consortium to ‘create’ semiconductor supply chain

A new European consortium is set to create a European semiconductor supply chain, German engineering company Bosch has announced. The Bosch-led engineering project will establish a supply chain for silicon carbide (SiC) technology, ranging from wafers to complete SiC power semiconductor devices and power electronics applications, the company said. SiC is a transformative technology that will help to bring about more energy-efficient and sustainable electronics.

Known as the ‘Transform’ project, short for ‘Trusted European SiC Value Chain for a Greater Economy’, a budget of EUR89 million in EU and national funding has been allocated. The project is expected to run until 2024 and bring together a total of 34 European companies, universities, and research institutions from across seven countries. The Transform project will focus on five use cases in the automotive, industry, renewable energy, and agriculture sectors.

Some new BMWs to ship without touchscreens due to chip shortage

BMW is dropping plans for touchscreens in many of its new cars due to the chip shortage. This is according to BMW who confirmed the news via car appraisal site Edmunds and automotive blog AutoBlog. Some of the affected vehicles include the 3 Series sedans and the X5, X6, and X7 SUVs. These vehicles are also going to lose access to the backup assistant feature, which automatically backs into spots for drivers after recording how they drove into them going forwards.
Instead of a touchscreen, drivers will have to use a controller in the center console that has touchpad-like features. This may sound like a non-issue, but touchscreens are a fairly standard feature in new cars nowadays, especially high-end cars like BMWs, and not having one will affect how drivers interact with their cars on a daily basis.

BMW isn’t the only manufacturer that has dropped key features from its vehicles. General Motors, for example, has dropped HD radio, built-in wireless charging, and auto stop-start on some of its models, including some of its high-end V8s. Those on the market for a new car may want to wait a couple of years for things to stabilize. After all, who wants to be using a car without a touchscreen for the next five to ten years?

Samsung to invest USD17bn on manufacturing operations in Texas

Samsung is building an advanced chip plant in Texas in line with the Biden administration’s plans to expand domestic manufacturing in the United States. According to rumors, the plant will be built in Taylor, Texas, close to its existing Austin plant, and cost USD17 billion. At the time of writing, however, this has not yet been confirmed by either Samsung or Texas officials.
The new manufacturing plant is set to make advanced logic chips used in mobile devices and autonomous vehicles. This comes at a time when, as we know, the global auto industry is facing a significant short-to-medium term semiconductor shortage.

The plant will augment Samsung’s existing plant in Austin, a sprawling complex where it has spent almost USD20 billion to date. The complex employs more than 3,000 people and builds some of the most complex microchips in the United States. It is thought that the new complex will create around 1,800 jobs in the first 10 years.
An official announcement is expected imminently.

Lead times for some microchips begin to see improvements

Lead times for microchips—the gap between when an order is placed and when its delivered—showed their smallest gains in around nine months, potentially signaling that the shortage might be starting to ease. The lead times increased by one day to roughly 21.9 weeks in October when compared with September. This is according to research by Susquehanna Financial Group. While this represents one of the longest lead times for semiconductors since the firm began tracking data in 2017, they are now contracting for certain types of semiconductors.
Power management and optoelectronic chips, for example, were easier to acquire in October. Meanwhile, the wait for microcontrollers—especially those required by automakers—lengthened by as much as six weeks in some cases.

“While some product categories may be loosening, checks with distributors still suggest supply pressure will remain into 2022 for power management” and other products, said Susquehanna analyst Chris Rolland. This includes Wi-Fi modules, microcontrollers and auto networking products.

Hyundai profits fall short of estimates

Hyundai Motor Company continues to be battered by the global shortage of semiconductors according to its Q3 2021 earnings. The Korean automaker announced a net profit of 1.3 trillion won (USD1.10 billion) for the July-September period. This is up from the loss of 336 billion won in the same period last year when the company was hit by a series of recalls. This figure is a little bit off from analysts’ predictions of 1.4 trillion won, it was reported by Reuters.

Hyundai’s global sales reached 898,906 units, a 9.9 % decrease from last year. Outside of Korea, sales were down 6.8 % to 744,159 units while sales in Korea decreased by 22.3 % to 154,747 units. Hyundai points to the ongoing chip shortage as the cause of this drop in sales. The company expects the shortage to continue having an impact on its performance throughout the fourth quarter. In a statement, a spokesperson for the company said: ‘Hyundai Motor expects that on-year sales growth might slow down for the rest of 2021 amid adverse business conditions caused by the unstable supply of semiconductor chips as well as potential unfavourable shift in the currency environment.

European automakers risk a repeat of shortage due to ‘reliance’ on Asia

European automakers must reduce their reliance on Asia for semiconductors or risk a repeat of the current chip crisis that has led to the shutdown of operations across the world. This is according to Oliver Zipse, who is chief executive of BMW and the chair of the European automakers’ lobbying group ACEA.

Zipse warns that the auto industry is facing “severe and immediate consequences” due to its inability to buy parts necessary for its vehicles. While plans are underway to build more chip factories in Europe, particularly in Germany and France, it will be several years until these plants are fully operational. This leaves Europe exposed to further shortages given that most of the production of semiconductors has shifted away from the continent due to higher labor costs.

In an open letter to the European Commission, Zipse says that a “concerted European initiative” will be required to establish more chip factories in Europe to rival chip manufacturing in Asia. “This unprecedented crisis reveals how unexpectedly vulnerable today’s semiconductor supply chain is, and how urgent it is to minimize our dependency on overseas markets, especially Asia, for these vital components,” he wrote.

General Motors set to restart all production lines by November

General Motors (GM), which since the beginning of the year has had to cut back its production operations due to the chip shortage, has made major progress in managing it. From November 1, the automaker will have no plants idled by the chip shortage as production activities are set to begin again across.

GM has been periodically shuttering its production facilities due to a lack of microchips since February. The automaking giant built thousands of vehicles, mostly its popular trucks, to near completion earlier this year. Of course, due to a shortage of the all-important microchips necessary for many of their vehicles’ systems, these trucks couldn’t be completed.
Now, GM’s head of North American operations Steve Carlisle has told reporters, “We’re a bit better than halfway through,” finishing the parked vehicles. “Our goal would be to clear out our 2021 model years by the end of the year.”

Taiwan’s industrial production strong despite ongoing shortage

Taiwan’s microchip production slowed down slightly in September to a rate of 12.24 % year-on-year, down from 13.43 % in August. The primary reason for this slight slowdown in growth was a high base effect from 2020. Most of the growth came from the production of semiconductors, up 20.5 % year-on-year, and machinery, up 24.55 % year-on-year.

While semiconductors have played a key role in keeping Taiwan’s growth figures healthy, it’s not likely that we’ll see faster growth rates as production capacity is thought to have reached its limit at semiconductor factories. As a result, further year-on-year growth is likely to be minimal and it will take quite some time for chip manufacturers to build new fabrication plants and extend their production.

Given that most analysts and semiconductor industry leaders have said that they expect the chip shortage to continue well into 2022 and perhaps even 2023, this expectation of limited further growth is likely to be accurate.

UK’s largest automaker scales back production at key facility

Jaguar Land Rover (JLR) has shut down car production at one of its main factories for a week as the global shortage of microchips continues to decimate the auto industry.Workers returned to JLR’s Halewood factory in the UK on October 25 after a week of producing no vehicles at all. The Halewood factory is responsible for producing the popular Land Rover Discovery Sport and Range Rover Evoque models, although the factory has struggled with supply issues throughout the year.

JLR, which is owned by Indian automaker Tata, is currently focusing on producing its Range Rover and Range Rover Sport models, which are the company’s most profitable product lines. Both of these vehicle models are built at its Solihull facility in the West Midlands. During the last year, JLR, which is Britain’s biggest automotive employer, is thought to have scaled back production at its Halewood and Castle Bromwich facilities on several occasions.
A JLR spokesperson said: “Like other automotive manufacturers, we are currently experiencing some Covid-19 supply chain disruption, including the global availability of semiconductors, which is having an impact on our production schedules. As a result, we adjust our production schedules to reflect this.”

Unveiling of Alfa Romeo ‘Tonale’ PHEV pushed back for second time

The Alfa Romeo Tonale has been delayed once again due to the chip shortage. The vehicle, which made its debut as a concept over two years ago, is highly anticipated and was due to be unveiled during Q1 2022. However, Alfa Romeo has now been forced to push this back even further.

This isn’t the first time that the Alfa Romeo Tonale’s debut has been delayed. According to the Italian carmaker’s CEO Jean-Philippe Imparto, the company wanted to have the vehicle’s hybrid powertrain to have better performance. This pushed the Tonale’s launch date further than initially expected.

When it eventually makes its debut, the Tonale is expected to be built at the Pomigliano d’Arco factory in Italy, alongside the upcoming Dodge Hornet. At the moment, Alfa Romeo hasn’t disclosed an exact date for the Tonale’s debut and availability for order. It’s likely the case that Alfa Romeo is planning to see how the shortage continues to unfold over the coming months before making any more announcements.

The chip shortage has now hit Apple

According to Bloomberg, Apple is starting to feel the effects of the chip shortage. Most of Apple’s newest products won’t be shipping until mid-November or early December at the earliest, and this includes the new iPhone 13, the iPad Mini, the 9th-gen iPad, the MacBook Pro, and the Apple Watch Series 7. What’s more concerning is that the delays aren’t just impacting Apple’s newest iterations of its popular devices but older products, too.

While delays are nothing new with Apple products, the problem is one of scale: It has been around one month now since the iPhone 13 was released and every version of the smartphone is difficult to find. Much like the PlayStation 5 and XBOX Series X, these phones are sold out in almost all stores and there are long lead times for online orders. Earlier this month, Apple slashed its 2021 iPhone 13 production targets by around 10 million units.
These delays are likely to leave a mark on Apple’s bottom line during Q4 2021, which is the company’s most profitable quarters.

Global 5G rollout could be slowed down by chip shortage

Connections to 5G networks are set to triple this year to over 630 million, but the continuing chip shortage could pose a threat to progress in the coming months. This is according to CCS insight, an analysis and intelligence company that focuses on the mobile and wireless sector around the world.

A combination of factors including the COVID-19 pandemic and sharply rising demand have led to chip shortages that have hit manufacturers of everything from phones to cars. Several automakers have had to scale back or pause production of their cars, the XBOX Series X and PlayStation 5 remain to be difficult to source almost a year after their release, and there are concerns surrounding the availability of high-end smartphones towards the end of 2021.

Indeed, it is this questionable availability of high-end smartphones that CCS says could slow down the 5G rollout: If the phones aren’t available to buy, it will simply be more difficult for consumers to access the network. Despite this, 5G networks continue to expand. In South Korea, which is currently leading the way with 5G, it’s expected that 30 % of mobile connections will be using 5G networks by the end of the year. Even in the United States, around 25 % network penetration is anticipated before Christmas, with China just a hair behind at 24 %.

Toyota cuts November production by 15 %

Toyota announced on October 15 that it would be cutting its November production targets by up to 15 % as the COVID-19 pandemic and global semiconductor shortage have made it difficult for the automaker to meet its manufacturing goals in the short-term.
While other major automakers have announced severe cutbacks in their manufacturing, this announcement by Toyota has come as a bit of a surprise to industry analysts. Toyota is understood to have stockpiled chips and thus, until now, has been able to weather the ongoing semiconductor shortage much better than its competitors.

In September, however, Toyota announced cuts to its production targets for September and October owing to the lack of semiconductors in addition to difficulties in sourcing parts from suppliers in Southeast Asia where COVID-19 is still rampant. Toyota had initially planned to manufacture around a million vehicles in November in a bid to make up for previous production shortfalls. However, continuing problems has forced the automaker to abandon these plans. Toyota now projects that it will instead manufacture 850,000 to 900,000 vehicles in November.

TSMC anticipates big boost to post-shortage profit margins

Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker, has said that it could achieve a gross profit margin of 50 % or more in the long-term. This is because customers have become more receptive to paying higher prices due to the ongoing global chip shortage.
In Q3 2021, the three months up to September 30, TSMC reported a net income of USD5.6 billion, up 13.8 % from last year and 16.3 % from Q2 2021. These results have beaten analysts’ estimates of an 11.2 % revenue increase when compared with Q2 2021, with TSMC dramatically ramping up capacity to deal with a spike in demand.

“We expect our capacity to remain tight in 2021 and throughout 2022,” TSMC CEO CC Wei told investors after forecasting that full-year revenue would rise by 24 %. TSMC has also announced the construction of a new chip fabrication plant in Japan. Construction of the facility will begin next year with production expected to begin in late 2024.

Audi extends production stops due to lack of semiconductor supplies

Audi is extending stops it put on production due to a lack of semiconductor supplies. The extension means that most of the assembly lines at its factories in Neckarsulm and Ingolstadt in Germany will continue to be paused.
At Ingolstadt, Audi’s assembly line for the Q2 crossover SUV and the A3 hatchback car will be at a complete stop week commencing October 25. There was no production on this line for week commencing October 11, either. The other two production lines at Ingolstadt, on which the A3, A4, and A5 hatchback vehicles are built, are only running on some days, but at reduced capacity with one shift each on Monday to Thursday.
At Neckarsulm, production of the A4 and A5 hatchback cars was stopped for week commencing October 18. A6, A7, and A8 modules will still be produced, but only from Monday through Thursday.
As it stands, there are no restrictions at the Böllinger Höfe factory, where the R8 and e-tron GT model cars are built.

VW’s Skoda will produce 250,000 fewer cars this year due to chip shortage

It has now been confirmed that Volkswagen’s Skoda Auto unit will produce 250,000 fewer cars than it planned this year due to the global chip shortage. This is more than double the number that Skoda CEO Thomas Schaefer estimated in September when he announced that he expected the automaker to produce 100,000 fewer cars than planned.
Skoda Auto put the brakes on production from the week beginning October 18th. While Skoda has said that this halt on production could last until the end of the year, output has been put on pause for an initial period of two weeks. Most working shifts at Skoda have been canceled until the end of the year as the company currently has around 10,000 unfinished cars in stock and wants to focus on completing these first. The production halt will leave only one production line operational to achieve this.

VW, Daimler AG’s Mercedes and Toyota are among automakers that have now been hit by factory shutdowns taking place in southeast Asia. In recent years, this region has emerged as a major hub for chip testing and packaging.

Arm Holdings CEO says shortage will continue throughout 2022

The CEO of chip designer Arm Holdings says that the ongoing semiconductor shortage will continue throughout next year. In doing so, he joins the long list of chip industry executives, including Intel CEO Pat Gelsinger, who forecast that the crippling supply pressures we’re currently seeing won’t be going away any time soon.
Speaking at The Wall Street Journal’s ‘Tech Live’ conference on Monday, October 18, CEO Simon Segars said, “What we’re seeing from our licensees is that they could all be selling more, if only there was more capacity to go around. Everyone is seeing huge demand.” Segars expects that the supply situation will have improved in around a year from now, but he doesn’t expect it to be fully resolved. “There is no quick fix,” he said.

While chipmaking giants like Intel and Taiwan Semiconductor Manufacturing Co., the world’s largest contract chipmaker, are dramatically increasing their long-term production capacity by building new chip fabs, these won’t be in a position to actually start churning out chips for at least another few years.

TSMC warns that chip shortage will extend ‘well into 2022’

The semiconductor shortage will extend into 2022, said TSMC CEO Dr. C. C. Wei in an online conference. TSMC, which provides chips for some of the world’s largest tech companies, is struggling to meet the soaring demand for its chips as consumer demand for electronics and vehicles stay high.
During the online conference, the TSMC CEO said that TSMC’s foundry production capacity remained insufficient to satisfy the demand for its chips. This is especially true for orders for components that are used in high-performance computing systems and 5G devices that use the chipmakers advanced 5nm process node.

TSMC’s other process nodes, which are used in chip production for IoT, automobiles, and server equipment, are also struggling. This has the potential to create severe repercussions across a range of industries due to the chipmakers diverse customer base. Some of TSMC’s customers include Apple, AMD, and Qualcomm, and their chips are used in everything from iPhones and graphics cards to networking equipment and electronic driver assist systems.

Chip shortage may force VW’s ‘Skoda’ production to pause...

Skoda Auto, which is part of the Volkswagen (VW) Group and the Czech Republic’s largest exporter, is set to significantly reduce—or potentially pause—production from the week beginning October 18th due to the global shortage of chips that’s currently crippling the automotive sector. This halt on production could last until the end of the year. “Not even Skoda Auto is able to avoid this global crisis,” Skoda Auto spokesman Tomas Kotera said in an emailed statement.

As has been widely reported, automakers around the world are currently battling with a shortage of crucial semiconductor chips following a post-pandemic rise in demand. This is hampering the Czech economy and many others in central Europe that have large automotive industries. Kotera says that the main reason for the hit to Skoda’s production is the large number of unfinished vehicles that are currently waiting for chips. “We, therefore, are first concentrating on finishing these vehicles so that we can get them to customers at the soonest,” he added.
Skoda is the backbone of the Czech Republic’s automotive industry, employing over 180,000 people and making up over a quarter of the country’s industrial output. The company has committed to maintaining jobs and wages for its employees during the production freeze.

...also carmaker Opel affected by the production stop until early 2022

Opel has announced that it will be halting all operations at its Eisenach plant in Germany until the start of 2022 as the global semiconductor shortage holds back production, the automaker has announced. This halting of operations has seen the construction of the company’s ‘Grandland SUV’ stopped in Germany, and employees have reportedly been told that they will have their shifts reduced to part-time work. Opel’s employees have been voicing their frustrations amid the revelation that the automaker will continue manufacturing its SUV at another facility in France.

"It is very concerning when the plant stands still for months and when you know production will continue elsewhere instead. It feels like a betrayal to us," an Opel employee said. About 1,400 people work at the plant in Eisenach.
While the German economy has bounced back sharply from the impacts of 2020’s pandemic-led shutdowns, with gross domestic product in Q2 2021 showing a 9.4 % increase over Q2 2020, major automakers have all experienced problems getting the semiconductors they need to make their cars. These manufacturers include many big names such as BMW, Daimler, and Volkswagen. Opel says the factory should return to its full capacity in the new year.

2022 Geneva International Motor Show canceled due to chip shortage

The 2022 Geneva International Motor Show, which was scheduled for February, has been canceled due to ongoing uncertainty surrounding the COVID-19 pandemic and the global chip shortage - two factors that have crippled the global automotive industry.
“We have pushed very hard and tried everything to reactivate the Geneva International Motor Show in 2022,” Maurice Turrettini, who runs the committee in charge of the show, said in a statement published on Thursday, October 7.

The Geneva International Motor Show is renowned for being a showcase for cutting-edge supercars, concepts, and prototypes. “Despite all our efforts, we have to face the facts and the reality: the pandemic situation is not under control and presents itself as a big threat for a large indoor event like GIMS. But we see this decision as a postponement, rather than a cancellation,” Turrettini added.

The Geneva Motor Show was one of the first big auto shows to get canceled in early 2020 before the spread of the then novel coronavirus had been officially designated as a pandemic. CEO of the motor show, Sandro Mesquita, said that the chip crisis is likely to continue into next year, and that original equipment manufacturers will face financial problems as a result. This means that, with only four months to go, many automakers are unable to make a commitment to participate in the trade show.

Chip shortage is ‘perfect storm’, says Audi CEO—but we’ll get through it

Premium automaker Audi, which is the Volkswagen Group’s biggest money maker, is having to find ways to tackle the ongoing semiconductor shortage on a day-to-day basis, said CEO Markus Duesmann when speaking to Reuters.
"We had a very strong first half in 2021. We do expect a much weaker second half. We really have trouble," he said, calling the shortage a “perfect storm”. Duesmann’s comments on the shortage highlight the problems that global automakers are facing while trying to get around a global chip shortage that has put the brakes on worldwide car production. But while vehicle sales have suffered and waitlists have grown longer, the blow has been softened by inflated vehicle prices which have boosted margins for automakers.

In July, Audi said that it had been unable to build 50,000 vehicles in the first half of the year. Despite this, its profit margin in the same period surged to 10.7 %, surpassing its 8 % profit margin for the same period in 2019. "We are dealing with it pretty well I would say," Duesmann acknowledged. He said the Volkswagen group was seeking closer ties with chipmakers and that the carmaker would emerge stronger from the crisis. "But at the moment it's a day-to-day troubleshooting process.”

AMD CEO is optimistic that chip shortage will ease by late 2022

It hasn’t been the easiest time for the chip industry, with almost everyone from automakers to PC enthusiasts feeling the pinch. A global shortage of silicon has affected the supply of core components, including virtually all graphics cards, high-end CPUs, and even some power supplies. According to AMD CEO Dr. Lisa Su, however, things should improve by the second half of 2022.
"We've always gone through cycles of ups and downs, where demand has exceeded supply, or vice versa," Dr. Su said at the Code Conference in Beverly Hills, California. "This time, it's different."
Dr. Su points to a combination of the pandemic, new product launches, and the cryptocurrency mining trend for creating the perfect storm for an ongoing shortage. The pandemic in particular, she says, has taken demand to a new level; more people found themselves working and learning from home, which drove demand for personal computers and laptops.

While AMD doesn’t manufacture its own chips, it does design them and then contracts external fabs such as TSMC, which itself is investing billions of dollars into setting up new chip manufacturing facilities. This is why Dr. Su is optimistic—“It might take, you know, 18 to 24 months to put on a new plant, and in some cases even longer than that. These investments were started perhaps a year ago,” she said. According to Dr. Su’s estimations, this means that we should start to see some relief from the chip shortage in the second half of 2022. This position is in line with comments she made in the summer when she admitted that through its manufacturing partners, AMD was increasing capacity with each passing quarter.

Malaysia lockdown restricts aluminum manufacturing—piles on chip shortage

Southeast Asia is a critical player in the global semiconductor packaging and testing industry, with several countries contributing materials, equipment, IP, and products that are used in the chipmaking process. Malaysia alone accounts for 13 % of global chip assembly testing and packaging, and 7 % of the world’s semiconductor trade passes through here. Unfortunately, the COVID-19 pandemic still very much has Malaysia in a chokehold; infection rates continue to soar and plans to lift local lockdowns have been thrown into disarray. This has had an obvious impact on local semiconductor trade capacity. Although Malaysian authorities have granted exemptions to certain manufacturers, operations are restricted at 60 % of the workforce, and this will only return to 100 % when more than 80 % of workers are fully vaccinated.

This has led to a crippled supply of aluminum capacitors, which only serves to pile more difficulty on top the already severe chip shortage. Aluminum capacitors are a key component in 5G infrastructure, consumer electronics, electric vehicles, and renewable energy technology. Unfortunately, leading suppliers of aluminum capacitors have been dealing with the shutting of operations their facilities, making it harder to meet demand. Industry sources believe that shipments of aluminum capacitors from Malaysia could drop by between 30 and 60 % due to the local COVID situation. At present, lead times have increased to over six months.

Tesla Shanghai builds 300,000 cars from Jan-Sept

In an announcement made during the same week that General Motors and Ford announced that they’ve had to suspend production yet again, citing a lack of vital microchips, Tesla Shanghai has announced that it has built 300,000 cars between January and September. By the end of the year, the company estimates that 450,000 of Tesla’s electric vehicles will have been produced amidst the worst microchip shortage on record, with most of this rolling stock poised for sale to the Chinese market. According to a report from the China Passenger Car Association, the Tesla Shanghai mega factory managed to build 240,000 units of the Tesla Model 3 economy car and the Tesla Model Y crossover SUV during its first three months of operation.

Meanwhile, Elon Musk attended an Italian technology conference and made comments indicating that the chip shortage will be a short-term issue. “There’s a lot of chip fabrication plants that are being built, and I think we will have good capacity by next year,” he said, clearly confident in his company’s ability to meet demand in spite of a crisis that has most large automakers in a stranglehold. Despite Musk’s confidence, chipmaking giants like Intel and TSMC have repeatedly stressed that their new chip foundries and manufacturing plants will not be operational any time soon, until late 2022 at the earliest, casting doubt over his high hopes.

UK demand for used cars rockets amid chip shortage

New figures from the UK Society of Motor Manufacturers and Traders (SMMT) have revealed that demand for used cars has soared in recent months.

The figures show that April to June 2021 was the “best ever second quarter” for the used car market, with over 2.1 million used cars changing hands—this is a rise of 108.6 % when compared to Q2 2020. In comparison to Q2 2019 figures, the increase is a more conservative 6.6 %.
Year-to-date, the used car market has grown by 33.3 % when compared to the first half of 2020. However, it remains 4.9 % down (some 200,000 units) when compared to the same period in 2019.
According to the SMMT, this significant uptick is primarily down to the easing of lockdown restrictions in the UK, an increased demand for personal vehicles, and a shortage of new car stock due to the ongoing chip shortage. This has fundamentally restricted the ability of manufacturers to ramp up automobile production to pre-pandemic levels.

In many cases, those looking for new cars are facing longer lead times compared to what would be considered normal, and some cars are even being sold without certain features that rely on microchips.

"More motorists are turning to used cars as supply shortages continue to affect the new car market, and the increased need for personal mobility with people remaining wary of public transport as they return to work,” said Mike Hawes, chief executive of the SMMT.

Chip shortage may turn into an oversupply by 2023, says IDC

Semiconductor supply could see a huge spike in growth over the next couple of years. This is according to a report by the IDC, which states that there’s “potential for overcapacity in 2023” as manufacturers put their operations into overdrive to meet rising demand and overcome backlogs that are currently crippling key industries.
IDC says that if chipmakers can do this, it would turn the situation on its head and lead to a significant shift from the current chip shortage into one of a potential supply surplus.

Several manufacturers, including many big names like TSMC, Intel, and Samsung, have announced plans to build new advanced chipmaking facilities. The U.S. government has also stepped in and recently passed legislation to bolster domestic chipmaking operations. While building foundries is great, it’s important to remember that they cannot be built overnight. Most of the increased capacity from these expansions won’t lead come to fruition until mid-2022 at the earliest. Although it may well be another year or longer until chip supply begins to catch up with demand, news like this is certainly a welcome change to the usual shortage doom and gloom.

Honda production capacity drops to 40 %

Honda has said that its factories in Japan have been operating at only 40 % of capacity in August and September due to shortages of semiconductors and other components caused by the COVID-19 pandemic. Despite the grim figures for August and September, Honda has said that it expects production to rebound to around 70 % capacity in early October.
"We are doing what we can to minimize the impact on production, but the situation remains unclear," a spokesperson for the company said.

The announcement from Honda comes soon after Toyota announced on September 17 that 27 out of 28 lines across its 14 Japanese plants would be suspended for at least 11 days in October. Toyota pointed to a shortage of components needed to make its chips due to the pandemic.
According to market research firm HIS Markit, semiconductor shortages and the delayed packaging and testing of chips will cause global light vehicle production to drop by 6.2 percent this year, or five million vehicles.

Infineon opens new chip factory three months ahead of schedule

Infineon Technologies, a leading supplier of chips to the auto industry, has just launched a €1.6 billion (US$1.9 billion) plant in Austria, three months ahead of schedule. The plant is located in Villach, and it’s anticipated that it will boost the semiconductor company’s ability to supply power chips to customers in automotive, data center, and renewable power generation.

The news that Infineon is expanding its power chip capacity comes at a time when global semiconductor supply chains are under unprecedented stress. Most major automakers have already been forced to strip back production due to the supply bottleneck, with Volkswagen AG’s truck division Traton SE being the latest manufacturer to warn that the shortage is jeopardizing deliveries.

Infineon itself has faced problems meeting delivery commitments after a winter storm took down one of its U.S.-based plants and coronavirus disruptions caused problems for Malaysian operations.
"Our timing in adding new capacity couldn't be better, considering growing demand for power-management semiconductors," said Infineon CEO Reinhard Ploss at the plant’s official opening ceremony.
The extra production of specialist power chips in Austria will serve growing demand for electric vehicles, solar power facilities, and data centers. However, analysts warn that it won’t help to alleviate chip shortage woes in the short-term.

Chip shortage could last into 2023, says Daimler boss

The chip shortage that is currently strangling global car production could continue into 2022 and even 2023. This is according to Daimler chairman Ola Källenius, who is also the head of Mercedes-Benz. While the auto industry staged a quick recovery from the COVID-19 pandemic, it has been failing to meet demand from customers.
The chip shortage has already caused several shutdowns of car making facilities around the world, including in Germany, the U.S., the UK, and Malaysia. "Chip producers say this will bleed into 2022 from a structural point of view and then gradually get better," he said, speaking to the BBC.

While Källenius acknowledged that this could mean shortages last into 2023, he is hopeful that they won’t be at the same level of severity that we’ve witnessed this year. He added that while Covid had been a “traffic jam” for the car industry and that it will take a while to get things moving at pre-pandemic speeds again, the fast recovery of the car market is good news for the industry on the whole despite current disruptions.

Chip shortage continues as more plant closures and order backlogs hit automakers

Chip manufacturers are continuing to struggle in the wake of pandemic- and natural disaster-led disruptions, with a cascade of factory closures across Asia, Europe, and North America exacerbating the shortage and preventing automakers from getting on top of their order backlogs. To make matters worse, continuing problems in global shipping and supply chains are adding further pressure and dragging out delays.

Recent estimates of the likely impact on car production because of the shortages have increased dramatically over the last few days. According to the latest survey by AutoForecast Solutions, 9.5 million vehicles may be lost because of the ongoing problems. This is almost 1 million higher than predictions made last week.

Automakers are beginning to worry that the trend could become longer lasting or even permanent as chip manufacturers cut production of automotive chips and prioritize more lucrative tech and telecoms chips. Even Toyota, which has been less affected by the shortage due to its close ties with suppliers, is starting to feel the pinch. The Japanese car maker was forced to cut its annual output target by 3 % on Friday due to factory closures in Malaysia.

Things aren’t looking good in the U.S., either. Ford and General Motors have reduced shifts at multiple factories nationwide in August and September. This translates to a huge drop in sales, with Ford reporting a 33 % drop in August compared to last year.

Background to the chip shortage - how it all began

It’s safe to say that a lot has gone on between the start of the chip shortage and the present day. While the chip shortage is considered to have “officially” started in 2020, several key events in the years immediately prior to 2020 significantly contributed to the problems chipmakers now face.
Below is a very brief breakdown of the key events that have taken place since the start of the U.S.-China trade war in 2018 and the present day.

2018 and 2019: Trade wars cause supply chain uncertainty

Since 2018 during the Trump Administration, a politically motivated trade war has existed between the U.S. and China. “The trade war took direct aim at Beijing’s ambitions to become a leader in advanced manufacturing technologies such as semiconductors and electric vehicles," wrote Josh Zumbrun in the Wall Street Journal in May 2021.

Even prior to the pandemic, this de facto trade conflict led to a great deal of turbulence and uncertainty for chipmakers and added to the concerns of analysts that geopolitics could severely hinder manufacturing and distribution.

The first round of U.S. trade tariffs hit Chinese imports in 2018 and focused on raw materials such as silicon. Tariffs like this had a ripple effect and led to a shortage of 8-inch wafers in late 2019. This shortage continues today and has had a severe impact on the automotive industry. Other tariff-induced problems were supply chain problems for foundry equipment and increased end-product demand.

Over time, the U.S.-China trade tensions led to the hoarding of wafer supplies when the U.S. blacklisted China’s SMIC in 2020. With so many key parts of the chip supply chain hindered, U.S. industries reliant on semiconductors—which is virtually any that produces anything electrical—were concerned that restrictions on Chinese imports would force China’s hand and lead to the development of their own semiconductor manufacturing ecosystem. And that’s exactly what happened.

Tensions also escalated in late 2019 when the Chinese government announced that a $75 billion tariff would be placed on U.S. goods. While an agreement between the U.S. and China was made in 2019 that included changes to China’s trade regime, this was later shrouded with uncertainty. By the end of 2020, China and the U.S. had only achieved 58 % of targets for U.S. exports to China under phase one of the agreement. The Peterson Institute for International Economics said China had "failed spectacularly" to meet its import targets, adding that the deal was for the most part a failure.

Then along came the COVID-19 pandemic. This added a whole new dimension of problems for the chip market.

2020: COVID-19 decimates chipmakers

The pandemic played a huge role in the chip shortage. According to several analysts, including Glenn O’Donnell, the vice president research director at Forrester, this was largely due to skyrocketing demand for cloud computing services from providers like Microsoft Azure and Amazon Web Services. “They [the service providers] buy a lot of chips,” he said in a blog post.

“Mobile phone sales remain hot. Makers like Apple, Samsung, and Huawei buy lots of chips. PCs are hot … Piled atop all that is a shortage of GPUs and other chips gobbled up by cryptocurrency gluttons. Demand is hotter than ever, and it's only getting hotter,” he added. Essentially, anything that’s got a power supply or a battery requires chips to work.

Owing to this demand surge, industries had to scramble to meet supply and demand in a highly uncertain and volatile economic climate. For chipmakers, production was halted for almost half of 2020 due to government shutdowns and COVID-19 restrictions. This piled onto the shortage to such an extent that by the time production resumed, semiconductor companies were well behind and had to adjust to severe demand pressure from various sectors.

The automotive sector was the prime example of this. It was a huge demand surge as consumer purchasing behavior shifted in the second half of 2020. As economies began to re-open, consumers dodged public transport due to the pandemic and started purchasing their own vehicles. This shifted the focus from consumer electronics and to automobiles, causing shortages in 8-inch wafers and ABF substrates necessary for automotive semiconductors. This was made worse by a fire at Japanese manufacturer Nittobo’s plant in July 2020. In response, Volkswagen, Ford, and Toyota, among others, cut, and in some cases completely halted their production in some factories, at a time when the automotive sector was booming.

In October, another fire broke out at the Asahi Kasei Microdevices (AKM) plant in Japan. This severely damaged the production plant and put it out of operation, forcing the company to work with a third-party manufacturer until the AKM plant’s operations could be restored. This caused problems in the market which caused prices to shoot up in the days following the fire as customers stockpiled supplies to safeguard their own supply chains.

2021: Natural disasters strike

After an incredibly difficult 2020, industries were hopeful that 2021 might offer a reprieve as countries began to recover from the COVID-19 pandemic and the automotive industry began to rebound. However, shortages continued to get worse with more demand growth, an ongoing shortage of raw materials, and unforeseeable catastrophic events. In Q1, the end-customer supply for key components was very tight. The shortage had caused a fall in growth and manufacturers were left fighting over scarce resources.

These problems were exacerbated by an earthquake in February which hit the Renesas Naka factory in Japan. This caused a blackout that suspended production. While the repercussions of this were relatively small, the factory was dealt a second blow when a fire broke out in March. This impacted a building where two-thirds of the company’s wafers for automobiles were produced, causing yet more problems for automakers.

Meanwhile in Texas, widespread power outages caused by storm Uri led to rolling blackouts. Manufacturers like Samsung, Infineon, and NXP Semiconductor were all forced to suspend their plant operations. To add to all the chaos, a drought in Taiwan, the country’s worst dry spell in half a century further threw chip production into disarray. This is because wafer fabrication requires large quantities of water for the production process.

Looking to the future

While it’s true that some of the big chipmakers are being proactive—Intel plans to spend more than $20 billion building new semiconductor factories in the U.S. and TSMC says that it will spend $12 billion on a new factory in Arizona—it’s going to be a few years yet before these plans come to fruition and they do nothing to quell the short- to medium-term problems causing the shortage. In the long-term, however, these and other projects in the pipeline should do a lot to meet future demand.

In May, Gartner analysts said they expect the worldwide semiconductor shortage to last until Q2 2022 at the earliest. By the end of the year, it’s hoped that the industry will start to balance out with more capacity. In the meantime, however, all that can be done to address the shortage is end-customers adjusting their production schedules to account for the disruption.

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