Electronic semiconductor shortage hits car production

A shortage of semiconductors for the vehicle industry because of Covid-19 and rising demand from other sectors is set to disrupt production in Asia-Pacific, Europe and North America into 2021.

Global automotive production ground to a halt in the first half of this year during worldwide lockdowns to slow the spread of the pandemic. But semiconductor manufacturers say they underestimated the rapid demand recovery from carmakers during the second half of the year.

Germany-based Volkswagen, India's Mahindra and Mahindra and Chinese producers have reported that a lack of availability of semiconductors for electronic systems is expected to reduce vehicle output into 2021.

"The massively restricted supply situation for semiconductors is causing considerable disruptions in global vehicle production across all manufacturers," Volkswagen said. "Due to the Covid-19 pandemic and the resulting decline in sales in the automotive industry, leading semiconductor manufacturers switched their production to other customer industries, such as consumer electronics. In the meantime, however, the car markets have recovered significantly, especially in China. This exacerbates the current situation and the industry — and also the Volkswagen Group — lacks appropriate electronic components."

The company said it will "adapt production" levels at various Chinese, North American and European locations in the first quarter of 2021 to the current supply situation, but did not estimate the actual volume impact. This would affect vehicles based on the MQB platform of Volkswagen passenger cars and commercial vehicles, Skoda, SEAT and, to a limited extent, Audi brands, the company said.

In China, economic stimulus measures are promoting sales of electric and traditional vehicles, but production is likely to slow in the first quarter because of the shortage of semiconductor chips, the China Association of Automobile Manufacturers said. And Chinese electronics manufacturer Huawei stockpiled semiconductor chips over the summer ahead of a US government ban on domestic producers exporting to the company, exacerbating the supply tightness.

The use of semiconductors is increasing in traditional and electric vehicles, as manufacturers develop advanced driver features and electronic entertainment systems that require sensors, integrated circuits and power controllers.

At the same time, the pandemic has accelerated semiconductor demand from consumer electronics producers, because of increased use of laptops and consoles for home working, education and entertainment. The rollout of new 5G telecom network base stations and devices is further driving demand globally.

"The electronic content in vehicles has been progressively increasing and incidents such as these only precipitate the need for localisation and self-reliance in auto electronics," said the president of the Automotive Component Manufacturers Association of India, Deepak Jain. "It is still not clear as to what extent and for how long the shortage of semiconductors will impact vehicle production in India. Any stoppage of vehicle lines has a resonating effect on the entire auto component manufacturing ecosystem."

This month, Indian automotive manufacturer Mahindra and Mahindra said that it expects a shortage of semiconductors at its supplier Bosch India to affect production and sales in the final quarter of the financial year ending March 2021. Bosch reported a "severe supply shortage" of imported semiconductors affecting its ability to meet automotive demand in India.

Industry association World Semiconductor Trade Statistics has revised up its forecast for global annual semiconductor sales, predicting an increase of 5.1pc in 2020, followed by a rise of 8.4pc in 2021, as the disruption it expected from the pandemic failed to materialise. It had previously forecast 3.3pc growth for 2020, climbing to 6.2pc in 2021. This year's growth will be led by a 12.2pc increase in sales of memory devices and 7.4pc growth in sensors, rising to 13.3pc and 7.8pc, respectively, in 2021.

South Korean vehicle components producer Hyundai Mobis, eyeing the demand growth for automotive semiconductors, has acquired the semiconductor division of Hyundai Autron, which makes electronic automotive control systems. "Hyundai Mobis has faced difficulties in developing system-optimised semiconductors and verifying their quality as controller specification and semiconductor development were not integrated," the company said.

Hyundai Mobis plans to shift its focus to developing high-performance system and power semiconductors for vehicles. "In the future automotive field, which encompasses autonomous driving and electric vehicles, the competitiveness of controller units depends on the performance of the semiconductors meaning that there will be an increase in demand for semiconductors."

By Nicole Willing