Volkswagen warns of production as global chip shortage hits automakers

The shortage is expected to last for some time, as it can take up to two years for semiconductor production plants to be operational. Photo: Hector RETAMAL / AFP via Getty

Volkswagen (VOW.DE) is the latest company to warn of the impact of semiconductor chip shortages on the auto industry.

The German automaker expects the global chip shortage to curtail vehicle production for its main car brand in the coming months, but production in its electric car division is not expected to be affected.

Volkswagen CEO Ralf Brandstaetter said he believed “the situation will remain tense”.

A fire at a plant operated by automotive chip maker Renesas Electronics (6723.T) and snowstorms in Texas also hurt factory production, at idle, he added.

Brandstaetter added that the impact of the combination of factors could last for a few months and plans to make up for lost production to the extent possible throughout 2021.

Global auto companies have been grappling with chip shortages as the COVID pandemic has resulted in increased demand in other markets such as smartphones and other consumer electronics.

The shortage is expected to last for some time, as it can take up to two years for semiconductor production plants to be operational.

Chips aren’t easy to manufacture either, with advanced semiconductors taking up to six months to produce.

The world’s largest chip maker, Taiwan Semiconductor Manufacturing (TSM) toned down any hopes the problems will dissipate soon by saying the shortage could continue until 2022.

TSM has announced plans to invest $ 100 billion (£ 72.4 million) over the next three years to increase the capacity of its factories.

READ MORE: Chip shortage brings auto factories to a halt

It joins a series of automakers who have halted production at auto factories due to the shortage of computer chips.

WATCH: Global chip shortage is wreaking havoc across various industries

Last week, the BMW-owned Mini announced it would halt production for six days pending more supplies.

Jaguar Land Rover, the UK’s largest automaker, has been plunged into yet another crisis as the shortage has forced it to temporarily halt production at two of its main factories.

In April, Nissan (7201.T) announced it would lay off around 10% or 800 employees at its UK plant in Sunderland amid supply chain issues.

The Japanese automaker has asked affected workers to stay on leave until the chip shortage ends and production can be ramped up.

The company also announced that it plans to halt production at some of its factories in Japan starting next month.

Other automakers have taken similar steps. Last month, U.S. automaker Ford (F) announced it would cut car production due to the global chip shortage and said its profits could be hit by $ 1 billion.

Renault (RNO.PA) and Honda (HMC) also reported similar plans, with the latter previously halting production at its Swindon plant. General Motors (GM) has warned it could face a profit of $ 2 billion.

The situation has worsened as automakers compete with tech companies, which have also experienced delays and chip shortages.

Semiconductors are used by a range of computer companies such as Microsoft (MSFT) and Sony (SONY), makers of Xbox and PlayStation game consoles, as well as manufacturers like Samsung (005930.KS) which makes phones, televisions and refrigerators.

Samsung co-chief executive Koh Dong-jin, who also heads its mobile business unit, said last month that there is a “serious imbalance” in the pecking order of who gets the limited stocks of chips.

Last year, Apple (AAPL), the world’s largest semiconductor buyer, was forced to delay the launch of the hottest iPhone 12 for two months due to the shortage.


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