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Chip crisis

In numbers: the semiconductor chip crisis

The automotive industry’s chip shortage has transitioned from being a seemingly minor irritation when murmurings were first heard out of China in December 2020, to a full-blown crisis that is never out of the headlines. GlobalData crunches the numbers surrounding the shortage 

The role of Covid-19 in the crisis has taken on a new complexion, seemingly running full circle.  

At its start, the common explanation was that the pandemic’s decimation of vehicle demand saw supplies pivot to sectors and products where short-term demand was more assured. 

When auto demand rebounded, strong supply constraints and capacity inertia at fab plants resulted in lengthening chip lead times of between six and nine months.  

However, nine months into the issue and the problems are deeper than ever. This time it is not the fab plants where the finger of suspicion is being pointed, but at the chip manufacturing and assembly plants themselves. A spike in Covid infection rates in Asia has seen local lockdowns and labour shortages affect manufacturing at chip plants in Malaysia and Thailand.  

As a result of the shortage, new vehicle inventory is severely curtailed – which in turn has had ramifications for sales. In the US, August’s light vehicle sales fell 17.3% despite strong demand. A similar picture has been painted elsewhere – sales in the UK fell 16.8% in August for example. 

A worsening crisis 

After appearing to ease during August, and disruptions heading in the right direction, the past three weeks have seen the crisis hit new heights. The prior week, with 35.3 weeks of production lost across the world, had marked a new high point but with depleted chip supplies not backfilled, due to disruptions to chip production in Asia, the week beginning 6 September will see just over 62 weeks of production lost. 

With Toyota succumbing to the crisis and Indian OEMs warning of slowdowns in September the number of plants affected has soared in September. From concerning 22 plants for the week beginning 23 August, the crisis rapidly escalated to the extent that 87 plants worldwide were embroiled in the shortage for the week beginning 6 September. Remember, this data just counts plants where there has been an official announcement of down days and not those where production may have slowed to a crawl due to the chip shortage. 

With unit losses year to date estimated at between 2.86m and 3.75m, depending on methodology used, the revenue losses up to the first week of September total between $86bn and $112bn. 

Up until August’s shock announcement that Toyota will be reducing global production by 40%, the manufacturer had weathered the chip storm much better than its peers. This was due to much-trumpeted and changed supply chain management priorities that were born out of the 2011 Fukushima earthquake. With Toyota now encountering wholesale disruption, we estimate that the company lies only behind Ford and GM in the disruption it has encountered year to date. 

Daimler chief Ola Kallenius announced at the outset of the 2021 IAA in Munich today that he now fears the chip crisis will extend into 2023. Sadly, few would bet against this scenario given the rapid escalation of the crisis we have seen in the past few weeks.