Globally, production of approximately 1mn light vehicles will be hit in the first quarter (Jan-March) of the year amid supply disruption of semiconductors, according to IHS Markit’s analysis.
The loss in production volumes is likely to recover after Q1. IHS noted that the shortage of semiconductors will be seasonal which will be covered up in the rest of the year, therefore, an absolute reduction in 2021 is unlikely in the calendar year. Challenges would still linger as most auto manufacturers are focused on meeting high demand.
The European Union and the US Administration are considering localized production of semiconductors and reduce dependency on Asian supply chain.
Auto sector has just recovered globally starting late-September quarter with most of the first half of 2020 under lockdown, and ramp-up of vehicles production clashed with increasing demand for semicondustors from consumer electronics sector, which was also recovering from the pandemic slowdown, noted IHS Markit. Semiconductor chips are also widely used in electronics.
The semiconductor supply chain for microcontroller units (MCUs) takes about 12 to 16 weeks lead time from order to deliver for OEMs normally but lately it has expanded to 26 weeks. This condition will only worsen, till the end of March, says IHS Markit.
All OEMs will be impacted by the supply shortages of chips but some smaller OEMS and some Japanese OEMs having enough inventories may be less impacted until their stock is consumed.
Integrated circuit vendors would need to diversify relationships with more foundry suppliers or expand capacities of current number of regions where integrated circuits are produced.