1,000,000 is a startling figure that highlights the effect of the worldwide chip shortage and other supply chain concerns on the automotive industry. According to a report by The Korea Times, the current backlog of automobiles at Hyundai and Kia is a combined one.
Of course, there are a few additional explanations, such as the Russian invasion of Ukraine and the current plant shutdown in China as a result of a new COVID-19 epidemic.
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Impact of chip scarcity on 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 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.
Do all autos suffer from the chip shortage?
Aside from the terrible human cost, COVID-19 has fundamentally altered every aspect of life, from travel and education to employment. The epidemic has also had a disproportionately negative impact on the automobile sector, seriously impeding vehicle production and clogging up supply lines all around the world. However, the continuous chip shortagewhich is still a major issue two years after the coronavirus spread over the worldmay be what has crippled automakers the most.
According to Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions, “The chip scarcity is still very much a problem” for a variety of significant reasons. This problem cannot be resolved fast.
The significant shortage of semiconductors, tiny components that are absolutely necessary even in the most basic vehicles and trucks, is still having a negative impact on both big and small automakers. In the future, as vehicles become more complex, everything from infotainment systems to heated steering wheels to advanced driver assistance features will be powered by some form of computer chip.
Toyota is still dealing with shortages, which will have an impact on production. In North America, the automaker anticipates a drop of between 25,000 and 30,000 vehicles in February. “Our teams are working carefully to minimize the impact on production,” the automaker said in an interview with Roadshow. The good news is that Toyota doesn’t think these gaps will have an impact on employment.
Similar difficulties face GM. Although things are improving, the company acknowledged late last year that it was unable to supply specific features on a variety of models due to a shortage of processors. Fortunately, none of the automaker’s North American assembly factories are currently shut down because of the global chip shortage, a spokeswoman for the Detroit-based company told Roadshow. The production of the Chevy Malibu and Cadillac XT4 as well as the Chevy Blazer and Equinox SUVs are constructed at the assembly factories in Ramos Arizpe, Mexico, and Fairfax, Kansas, respectively.
An estimated 1.25 million Ford sales were lost last year. Volkswagen, GM, and Toyota each missed their target by 1.1 million units, while Stellantis fell short by roughly 1 million vehicles.
How long will the automobile shortage of chips last?
The chip scarcity is anticipated to alleviate during 2022, although it might not be ready for the history books until the second half of 2023. But it’s impossible to predict with certainty how it will turn out. Numerous locations are still being impacted by COVID-19, and it is difficult to foresee any new variations.
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.
Why are microchips in short supply?
WASHINGTON
The US is dealing with a “An alarming shortage of semiconductors was discovered by a government survey of more than 150 chip-making and chip-buying businesses; the situation is endangering American manufacturing and boosting inflation, according to Gina M. Raimondo, the commerce secretary, in an interview on Monday.
She argued that the results demonstrated the urgent need to promote domestic manufacturing and urged Congress to enact legislation to increase American output in order to increase American competitiveness with China.
“The predicament we find ourselves in as a nation and the urgency with which we must act to expand our domestic capacity, according to Ms. Raimondo, is quite alarming.
The results demonstrate that even as global chip makers get close to their maximum production capacity, demand for the chips that power cars, electronics, medical devices, and other products far outpaces supply.
Between 2019 and 2021, semiconductor demand grew by 17 percent, but supply did not follow suit. According to the data provided by the Commerce Department, the vast majority of semiconductor production plants are employing roughly 90% of their capacity to produce chips, which means they have limited immediate opportunity to boost their output.
As technologies like 5G and electric vehicles gain popularity and consume large quantities of semiconductors, the need for chips is predicted to rise.
Over the past two years, shortages and increasing prices for semiconductors have been caused by a combination of the soaring demand for consumer goods containing chips and production disruptions brought on by the epidemic.
Some factories that depend on chips to make their products, like those of American automakers, have been forced to slow down or stop production as a result of the shortages. This has slowed down economic expansion in the US and raised car prices, which is a major contributor to the country’s skyrocketing inflation. Inflation reached a 40-year high in December of last year thanks in part to a 37 percent increase in used automobile prices.
In an effort to identify industry bottlenecks and find solutions, the Commerce Department issued a request for information to consumers and global chip makers in September. The department sought data on inventory, production capacity, and backlogs.
The results of that survey, which the Department of Commerce released on Tuesday morning, show how scarce the world’s chip supply have grown.