Showing posts tagged 'automotive industry'
04 August 2021
Chips shortage limits auto production in Brazil and the rest of the world
“Never seen anything like it,” Tesla’s Elon Musk tweeted last month about the global chips shortage, “Fear of running out is causing every company to overorder - like the toilet paper shortage, but at epic scale.”
If you want a prime example of the chips shortage, look to Brazil.
In 2020, the automotive industry in Brazil was hit hard by chip shortages and the coronavirus pandemic. Approximately 1.61 million passenger cars were made in 2020, a decrease of over 34% compared to the following year.
2021 got off to a flier… then grounded
2021 got off to a much better start for Brazil, with 1.14 million passenger cars leaving the production line in in the first half of the year, a 57.5% increase compared to the same period last year. However, production has hit a ceiling.
Brazil's Association of Automotive Vehicle Manufacturers, ANFAVEA, has disclosed that because of chip shortages, Brazil missed its target for automotive production in the first half of 2021, and the numbers cited are startling.
According to ANFAVEA, some 100,000 to 120,000 passenger cars were prevented from entering production by the chips shortage. In June, only 166,947 passenger cars were made, the worst figures of any month in the last 12 months.
Manufacturing limitations created by the chips shortage have been compounded by the coronavirus pandemic. Brazil has seen 19.8m coronavirus cases with a 2.8% mortality rate, sadly resulting in over 500,000 deaths.
The biggest factories are struggling in Brazil
More than 20 plants in Brazil run by the likes of Volkswagen, Mercedes-Benz, General Motors, Nissan, Toyota, Renault, Volvo, Scania and Honda have shut down temporarily in 2021 because of the chips shortage and the pandemic.
At the beginning of June, Volkswagen halted operations at two Brazilian plants amid the chips shortage for 10 days. The company said, “A significant shortage of semiconductors is resulting in several supply bottlenecks.”
Then, in July, Hyundai Motor temporarily halted the operations of its Brazil plant due to the chips shortage. The closure was the first in the Piracicaba plant’s history, raising the alarm over chip shortages in the automotive sector.
What next for the Brazilian automotive sector?
Figures show that in the first half of 2021, the Brazilian automotive sector had a strong rebound on 2020. However, water has been thrown over the fire towards the middle of the year, due to chip shortages across the sector.
Local manufacturers expect to see some relief after August as manufacturing plants catch up, but manufacturers are uncertain about when the supply chain will normalise.
How’s morale among big companies? Sombre, to say the least.
Dell’s CEO echoes these sentiments, "The shortage will probably continue for a few years. Even if chip factories are built all over the world, it takes time."
So, whichever way we look, and whichever experts we ask, the global chip shortage is showing no signs of abating. For Brazil’s auto manufacturers, making supply meet demand will be the biggest test of the last few decades.
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10 March 2021
Chipageddon is upon us
Semiconductors go unseen yet they are at the heart of all our electronics. When supplies run short manufacturing lines slow down and the availability of products is affected. Last year had several examples, some of which may have affected you.
AMD’s Radeon RX 6800 XT GPU was released in December but got nowhere close to meeting demand. Sony’s PS5 and Microsoft’s Xbox Series X sold out immediately and are rarer than hen’s teeth today. Even Apple admitted that the chip shortage affected sales of the iPhone 12 because they had to stagger product launches.
Then, near Christmas, the word “Chipageddon” was used by an automotive industry insider to describe the chip shortage affecting the automotive industry.
It’s easy to overreact about things, but today’s chip shortage is worth getting in a sweat about. Supply and demand is faltering, and manufacturers are genuinely struggling to get the chips they need to make products.
Supply and demand is a basic economics model linking the relationship between the quantity of a commodity available and the quantity people want to buy to price determination. When supply exceeds demand, prices increase. When the opposite happens, prices decrease. It’s easy enough to understand.
If you’re still with us, the chip shortage has had two main impacts:
- Fewer chips are available
- Prices for chips are increasing
This is a double whammy. It means manufacturers are making fewer products and paying more to make them. These costs DO get passed to you, the consumer. It’s the reason why you see random 10% increases in smartphone prices.
You also have the issue of foundries running at max capacity coupled to the low number of foundries that manufacture the newest wafers.
Industries worst hit
By far the worst-hit industry by a chip shortage is the automotive industry. The world's largest carmakers are facing a critical shortage of semiconductors at a time when demand is increasing, and cars are getting smarter.
Today’s cars have as many as 50 semiconductors that run a variety of systems. In a few years, this number is expected to increase to over 100. 60 million cars are produced each year worldwide. It means the industry needs 3,000,000,000 semiconductors, an enormous number whichever way you look at it.
Another industry hit hard by a chip shortage is consumer electronics. Smartphone manufacturers like Apple and Samsung are struggling to meet demand because there are not enough semiconductors to go around. Sony and Microsoft can’t manufacture as many game consoles as they need to because of lack of supply.
What’s the solution?
Chipmakers need to expand capacity and build more factories. Manufacturers need to consider alternatives to primary component suppliers. The issue is that chip fabrication plants take two years to set up and a low-quality chip can stop an expensive product from shipping. This is as much a quality demand issue as a supply one.
One way you can make sure you have the chips you need is to partner with an electronic component distributor like us. We specialise in the procurement and delivery of electronic components and parts for a wide variety of industries.
Call: 01904 415 415
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