A global semiconductor shortage is starting to cause production disruptions at several major automakers. The shortage is causing both production halts and slowdowns at assembly plants around the world.
Thus far Volkswagen, Ford, Fiat Chrysler, Toyota and Nissan have all publicly confirmed production disruptions surrounding the semiconductor shortage. Ford is the most recent announcement, confirming plans to idle its Louisville, Kentucky plant next week. The Louisville plant produces the Ford Escape and Lincoln Corsair.
Toyota recently slowed down production of its Tundra pickup at its San Antonio assembly plan. Meanwhile, Fiat Chrysler temporarily closed plants in Brampton, Ontario and Toluca, Mexico. Volkswagen and Nissan have also stated their operations have been impacted by the shortage, according to ABC News.
Due to the level of technology found in most modern vehicles, the semiconductor shortage is wide-reaching. Typically silicon chips that act as control or memory, semiconductors are found in many vehicle systems.
There’s really two root causes of the global semiconductor shortage. The first the fact that most factories that produce semiconductors had to shutdown early in the global COVID-19 pandemic. This extended shutdown obviously reduced the global supply base for semiconductors.
The second cause is related to the first. Once semiconductor manufacturing came back online these plants prioritized building chips for consumer electronics, not vehicles. At the time most automotive assembly plants were still shutdown due to the pandemic and low consumer demand. With vehicle demand tanking, these semiconductor makers allocated their resources to what was still selling.
Sanctions imposed by the Trump Administration on 11 Chinese companies for alleged labor abuses also compounded the issue.
Now auto sales are rebounding, but there’s a lag in the semiconductor supply chain. Until this gap is made up from the semiconductor producers, just about every major automaker is going to have interruptions in vehicle production.
Each automaker will deal with this issue differently. Some will slow production of all of their products to accommodate for the reduced semiconductor supply. Other automakers may shutdown plants of slower selling vehicles to prioritize hot-selling products, such as trucks and SUVs.
The shortage is expected to have varying impacts on the industry for the next several months.