The backorders account for almost 15% of the 6.66 million vehicles the Korean duo sold globally in 2021 and 13% of its initial 2022 sales forecast.
Due to a shortage of wiring harnesses as well as semiconductors, Kia’s domestic facilities only operated at 82 percent of capacity in the previous month. 40,000 automobiles are currently in the waiting process at Kia factories in the United States, Mexico, Slovakia, and India.
According to the article, delivery periods can be as lengthy as 18 months. The Hyundai IONIQ 5, Kia Sorento Hybrid, Sportage Hybrid, EV6, Genesis GV70 and GV60 are a few of the most affected vehicles. The majority of them are electric cars, whose popularity has increased dramatically recently as a result of sharply rising petrol prices.
According to researchers, the worldwide chip scarcity will likely continue through 2023 and through 2022.
Sales of new vehicles fell by 12.3 percent in Canada and 16.6 percent in the United States during the first quarter of 2022. Additionally, there was a little decline from the last quarter of 2021.
In This Article...
Is there a lack of microchips at Kia?
The continuous global shortage of semiconductor chips continues to have an impact on the output of South Korean automaker Kia Motors Corp., which recorded a fall in sales of 212,819 vehicles, or about 6 percent, year over year, according to The Korea Herald citing Yonhap.
Why are new automobile chips in low supply?
The primary causes of the chip scarcity are still pandemic-related manufacturing closures and disruptions in consumer demand, even two years after COVID-19 first shocked the globe with its shutdowns.
Why is there a Kia shortage?
Due to a number of causes, including a lack of semiconductors, the Russian invasion of Ukraine, which created fresh supply issues with wire harnesses, and plant closures in China due to a new COVID-19 epidemic, Hyundai and Kia had amassed a combined backlog of 1 million vehicle orders.
According to The Korea Times, which cites industry officials, Kia and Hyundai had a backorder of just 100,000 cars at the beginning of 2021, but by March 2022, that figure had risen to over 500,000. The brand’s target of selling 7.47 million cars this year will be significantly hampered by the delay. The backorder accounts for 15% of 2021 sales for both Kia and Hyundai, which reached 6.66 million vehicles.
Only 82 percent of Kia’s Korean production was running at full capacity in March, resulting in a 26,000 vehicle shortfall. Semiconductors caused the failure of 19,000 of those vehicles, and a deficiency in wiring harnesses was to blame for the remaining 7,000. Manufacturing failures of 14,000 automobiles were also experienced in American, Mexican, Slovakian, and Indian factories.
Is there still a lack of microchips for new cars?
Nearly halfway through 2022, the anticipated global microprocessor shortage is still having a disastrous effect on the auto industry. Dealer lots appear to be empty, “market adjustments” are heavily used to inflate new car costs, and popular new models like the Ford F-150 Lightning, Bronco, and Maverick are hard to find. According to a recent study from Automotive News, these problems have prevented the construction of millions of cars.
According to an ongoing industry count from AutoForecast Solutions (AFS), the sector is currently short more than 2.2 million vehicles globally for the whole year. This new figure indicates an increase of more than 10% from the group’s prior year-to-date total and provides a very pessimistic forecast for the remainder of the year’s new car sales.
AFS estimates that North American assembly plants will account for the majority of the cutbacks. Of the 234,200 vehicles that have been added to the total, almost 88 percent (or 205,200 units) are cars and trucks that were supposed to be produced in North America but have instead ended up on the cutting room floor rather than a dealer’s lot. The expected year-to-date deficit of vehicles made in North America now stands at 780,800 units.
Despite the fact that North America’s figures aren’t looking good for the year, it isn’t the region that has been impacted the most globally. This sad honor goes to Europe, where a manufacturing loss of 794,100 vehicles is anticipated. The semiconductor shortage has also affected an additional 107,300 devices in China, 437,900 in the rest of Asia, 98,200 in South America, and an additional 12,000 in the Middle East and Africa.
While 2,230,400 units have already been destroyed globally this year, according to AFS, 3,040,861 will be added to the total. Although that may sound like a lot (and it is), there is a little glimmer of hope that the worst may now be behind the car sector.
According to AFS’s forecasts, this year will see a total increase of 810,461 vehicles lost to the microprocessor shortage, a rise of around 36% over the units lost thus far in 2022. It’s crucial to remember that the year is almost halfway over, so as shortages subside, product availability should start to improve. This reflects the attitude expressed by Jim Farley, the CEO of Ford, earlier this year, and suggests that part shortages may ease in the second half of 2022.
The biggest question is whether greater availability will contribute to a reduction in exorbitant car prices any time soon. Even if the availability appears to be improving, there is still a sizable shortage that may not be resolved until 2023 or later.
For how long will there be a chip shortage?
Briefly, the shortage will have persisted for 24 months until it ends, which is comparable to the length of the 20082009 chip shortfall, according to Deloitte. Separately, a few industry insiders predict that the chip scarcity afflicting the semiconductor and electronics sectors would likely lessen in the second half of this year, once the automotive-related backlog has been cleared.
The chip scarcity may have had the most impact on the automotive industry.”
According to Gartner’s research VP Andrew Norwood, shortages in the supply chain during the post-Covid economic recovery in 2021 severely hurt the automotive sector.
The prevailing assumption is that the global chip scarcity may start to relieve by the second part of this year, while some automakers are less certain. According to Reuters, German carmaker Volkswagen predicts that the semiconductor scarcity will continue in the first half of 2022 and should somewhat improve in the second.
Other automakers, including General Motors, Ford, and Hyundai, believe that the chip scarcity would alleviate in the second half of this year in a separate Reuters story, although automotive semiconductor manufacturers NXP and Infineon have predicted that supply will remain limited.
“Infineon CEO Reinhard Ploss was reported by Reuters as stating in an investor call that supply constraints are far from over and will go far into 2022. Infineon is afraid that the spread of the Omicron type of the virus would force China to close plants and restrict supply. The report stated that NXP had stated that the industry will not be able to resolve the supply-demand imbalance this year.
Lingering but with less severity
Deloitte Global predicts that while the shortage will continue through 2022, it won’t be as bad as it was in the fall of 2020 or for the majority of 2021, and it won’t affect all chips. Customers had been waiting between 2052 weeks by mid-2021 for a variety of semiconductors, the company claimed. This caused factory delays or shutdowns, which resulted in revenue losses in the tens or even hundreds of billions of dollars.
It anticipates that lead times will be closer to 1020 weeks by the end of 2022, and that the industry will be finally in equilibrium by the beginning of 2023. “Given that there is a good chance that chip shortages will continue into 2022, everyone should be ready for lengthier lead times and potential delays. According to Deloitte, the extent of these will probably vary by industry and application.
However, there is one significant obstacle that producers, distributors, and equipment providers of semiconductors must overcome: the boom-and-bust cycle that the sector is renowned for. According to Deloitte, “Historically, every shortage has been followed by a period of oversupply, which has led to declining prices, revenues, and profits.
Is the shortage of chips improving?
A 100mm tobacco cigarette was formerly introduced by cigarette company Benson and Hedges. The Liggett and Myers Tobacco Company developed the Chesterfield 101 to compete, advertising it as being “a ridiculous millimeter longer.” The late 1960s TV advertisement is still accessible on YouTube. Of course, both cigarette products were little more than gimmicks. Although it was just the same old chopped tobacco that had been mixed with additives and wrapped in paper, the cigarette manufacturers decided to give their goods a backstory that somehow involved millimeters. Millimeters have significance in the production of semiconductors. For instance, a 300mm wafer may accommodate many more chips than a 200mm wafer, which lowers production costs. On 300mm wafer-making machinery, all cutting-edge semiconductor technologies now process 300mm wafers. Since 200mm semiconductor fabrication is still active for older process nodes, 200mm fab data are used as proxies for those nodes. Moving chips created with previous process nodes to the larger wafer size to further reduce costs is typically not economically feasible because existing 200mm manufacturing lines and equipment are completely amortized.
Unless you’re living on a remote island, you must already be aware of the current chip scarcity. Maybe you’ve heard enough about the subject enough. All kinds of other product shortages, including those for vehicles and trucks, appliances, mobile phones, PCs, laptops, and other electronic devices, are being attributed to the chip shortfall. Last year, I wrote about the chip scarcity. (Read: How Long Until the Chip Shortage Eases? My hometown of Louisville, Kentucky’s Ford truck plant was in a terrible predicament, with unfinished F-150 trucks piling up like cordwood while waiting for chips, as I described in that post. similar to semiconductors
The situation seems barely better as I write this essay. Retail car stocks are drastically reduced, and it appears that they will remain that way. Toyota reported a 100,000 vehicle production reduction in April and attributed the reduction to a shortage of semiconductor components. Paul Jacobson, the chief financial officer of General Motors, stated the same thing in April: “We don’t expect a big increase in inventories this year.”
Manufacturers produced about 2 million fewer vehicles in 2018 than in 2019, according to an article by Sean Tucker that appeared on the Kelley Blue Book website at the end of March and was titled “Microchip Shortage Update: Car Production Still Slowed” (the last pre-pandemic year). The poor numbers were mostly caused by a global microprocessor scarcity. Slowly, it has started to ease up.
The worldwide demand for semiconductors is still quite high, and semiconductor producers are still having difficulty keeping up with it. Despite the manufacturers shipping whatever they can, there is still a tremendous demand for CPUs and memory to fill PC, laptop, and server boards. We won’t likely see the results of these expenditures for three to five years, but the largest semiconductor producers, including Intel, TSMC, and Samsung, are investing tens of billions of dollars to develop and outfit new fabs that can produce components with cutting-edge process nodes. But please keep in mind that Ford, Toyota, GM, and other automakers do not require cutting-edge technology. No, their cars require components built on earlier process nodes, such as microcontrollers, sensors, discrete power semiconductors, and related items.
In my previous piece on the chip shortage, I highlighted a research titled “200mm Fab Outlook through 2024” that was released in September by Semi, the industry group that supports the global electronics design and manufacturing supply chain. That article stated:
During the same time period, wafer manufacturers will add 22 new 200mm fabs to help meet the growing demand for 5G, automotive, and Internet of Things (IoT) devices that rely on analog, power management, and display driver integrated circuits (ICs), MOSFETs, microcontroller units (MCUs), and transistors. “Semiconductor manufacturers worldwide are on track to boost 200mm fab capacity by 950,000 wafers, or 17 percent, from 2020 through 2024
The new information in the 200mm fab report, which Semi just updated, is positive. The development in demand for mobile, automotive, and IoT (Internet of Things) applications, according to Semi’s most recent statistics, has undoubtedly contributed to an increase in 200mm capacity. Modern manufacturing technology are not needed for these applications. They need a variety of essential semiconductor items, such as MEMS sensors, analog ICs, and power devices. There is a strong commercial case for continuing to produce these sorts of semiconductors, especially in light of the price increases brought on by recent increases in demand and the ensuing shortages.
This most recent Semi study states that the 200mm fab capacity climbed by 6% in 2021, is anticipated to expand by 5% in 2022, and will increase once more by 3% in 2023. In 2024, the new research predicts more moderate growth of around 2%. Want to know more? Because they didn’t want me to advertise their store, which is understandable, Semi refused to hand me the report. To get the information, they want you to purchase the report. I will talk about some intriguing graphs that Semi did email me from the most recent report, though.
Let’s begin by taking a macroview of the 200mm fab capacity:
A few things are depicted in this graph. First, there has been a significant increase in the construction of new 200mm fabrication facilities and the addition of 200mm production lines to already existing fabs. In the graph above, that is the red line. This figure will start to grow sharply in 2019. The same graph’s blue bars show that Semi anticipates a significant increase in 200mm wafer capacity from around 5500 thousand wafers per month (WPM) in 2018 to almost 7000 in 2024, which is when the present report comes to a conclusion. The previous record for 200mm capacity was 5500,000,000 WPM, which was established back in 2007. After that year, the capacity of 200mm wafers declined for eight years.
According to Semi’s data from the previous year, the quantity of 200mm fabrication facilities peaked at 202, but then declined to 180 in 2015. According to the estimate, we will reach a new high-water record of more than 210 200mm fabs and fab lines by 2024.
The following graph from the most recent study is as instructive and shows a breakdown of the world’s 200mm fabs by area.
As you can see, 200mm fab capacity is expanding steadily and strongly in the Americas and Japan, slightly more favorably in Southeast Asia and Taiwan, and rapidly in China beginning in 2020. This information is consistent with anecdotal accounts I’ve heard about Chinese suppliers essentially controlling the market for used semiconductor production machinery. Korean semiconductor producers, meanwhile, don’t seem to be concerned about the 200mm scenario. The capacity of that 200mm fab appears to be staying the same.
I was genuinely shocked by the third graph in the most recent Semi 200mm fab report. It demonstrates the different kinds of semiconductors produced on these 200mm lines.
The Memory Guy, a good friend of mine, published a piece on April 27 that brings the chip shortage into stark relief. How the Chip Shortage Impacts Memories is the topic of the article. In this article, Handy makes note of the semiconductor industry’s average annual growth rate since 1996, which has been 3.9 percent. There have, however, been significant, event-driven swerves from that pattern, which Handy depicted on a useful graph. (With permission, reprinted below.)
The three-month moving average (3MMA) for semiconductor revenue is shown in Handy’s graph as a red curve through time, and a 3.9 percent trend line is shown as a black dashed line. The graph also displays the impact of three significant global events on the expansion of the semiconductor industry. 2009’s Great Recession drastically reduced demand, led to a supply overhang, and drastically reduced semiconductor sales.
Businesses purchased more than they required as a safety net against probable shortages in 2017 as a result of the US-China trade conflict. Due to the chipmakers’ inability to keep up with the demand, this overordering actually created a scarcity, which led to an increase in price.
The Covid-19 outbreak led to a 45 percent boost in revenues as consumers and businesses alike ordered more electronics to support working from home. The majority of that rise is the result of large, above-average exports, with some of it being attributed to higher unit costs. Chip manufacturers have been exporting all of their products while also making significant capacity expansion investments.
Finally, Handy says:
What’s likely to happen next? If you take another look at the graph, it appears that there are plenty of grounds to believe that the market will eventually return to its initial growth level of 3.9 percent, shown by the black dashed line. It constantly does. Given that February’s revenue was by 45 percent above trend, it won’t be simple. However, the shortage and accompanying record revenues will eventually come to an end, and when they do, revenues are likely to follow the same sharp decrease that the chart predicts will occur in 2019 and that also appears to a much lesser extent in the six minor downturns between 2010 and 2017.