This aerial photo shows cars parked up after coming off the production line at the Vauxhall manufacturing plant at Ellesmere Port in northwest England on Feb 22, 2021. (PAUL ELLIS / AFP)
A fire at a semiconductor factory in Japan, cold weather in North America and ongoing competition for chips are all hitting the global auto industry at the same time, threatening to exacerbate supply shortages of a key component that began late last year.
A clean room at a plant run by Renesas Electronics Corp., one of the top providers of automotive chips, was damaged by fire on Friday, the company said. The incident will probably have a big impact on the car industry, Chief Executive Officer Hidetoshi Shibata said during an online news conference Sunday.
Now, with supply chains already under strain, global automakers have to contend with bad weather and other unanticipated disruptions to keep up production and recover from the steep drop in 2020 sales due to the coronavirus outbreak
Global automakers were already coming to grips with a shortage of chips caused by booming demand for laptops, tablets and home electronics by people staying and working indoors during the pandemic. Now, with supply chains already under strain, they have to contend with bad weather and other unanticipated disruptions to keep up production and recover from the steep drop in 2020 sales due to the coronavirus outbreak.
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“I’m concerned that this will have a very big impact,” said Shibata, adding that Renesas is seeking to resume operations at the facility within a month and anticipates 17 billion yen (US$156 million) in lost revenue because of the incident. “We’ll pursue every possible measure, including the use of output alternatives, to make the impact as minimal as possible.”
Renesas gets about 6.6 percent of its revenue from Toyota Motor Corp. one of its main customers, according to Bloomberg’s Supply Chain Analysis. Renesas posted 715.7 billion yen in revenue last year. Toyota has also warned that cold weather-induced semiconductor shortages will force it to suspend a factory in the Czech Republic for two weeks.
“This is terrible for the automobile supply chain; they might have to move toward holding more inventory,” Bloomberg Intelligence analyst Masahiro Wakasugi said of the Renesas fire. The big question is whether Toyota, which has been managing its supply chain better than other automakers, will be hit, he said.
Cold weather in North America is also disrupting supplies of other raw materials used for automobile manufacturing.
Toyota warned last week that the cold front has reduced supply of petrochemical products, impacting production in the US and Mexico. Some lines, shifts or potentially entire plants are expected to be temporarily halted for several days in Kentucky, West Virginia and Mexico, the company said.
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Toray Industries Inc. has warned buyers of its Nylon 66 fiber, used mainly for vehicle airbags, that it may not be able to fulfill its obligations to supply the product because it doesn’t have enough raw materials to make it due to the US cold snap.